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The Distributional Characteristics of a Selection of Contracts Traded on the London International Financial Futures Exchange

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  • John Cotter
  • Donal G. McKillop

Abstract

This study examines the distributional properties of futures prices for contracts traded on LIFFE. A filtering process is employed to remove day of the week and holiday effects, a maturity effect, moving average effects and the influence of an asset’s conditional variance from the raw returns series. Alternative distributional models from the stable paretian and ARCH families are examined for their applicability to futures data using a stability under additions. The results conclusively reject the hypothesis that futures returns are normally distributed with findings in favour of two related hypotheses – the mixtures of stable distribution and the ordinary stable distribution.

Suggested Citation

  • John Cotter & Donal G. McKillop, 2000. "The Distributional Characteristics of a Selection of Contracts Traded on the London International Financial Futures Exchange," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3‐4), pages 487-510, April.
    • Handle: RePEc:bla:jbfnac:v:27:y:2000:i:3-4:p:487-510
    DOI: 10.1111/1468-5957.00322
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    Cited by:

    1. Cotter, John, 2006. "Modelling catastrophic risk in international equity markets: An extreme value approach," MPRA Paper 3507, University Library of Munich, Germany.
    2. John Cotter, 2005. "Extreme risk in futures contracts," Applied Economics Letters, Taylor & Francis Journals, vol. 12(8), pages 489-492.
    3. Cotter, John, 2001. "Margin exceedences for European stock index futures using extreme value theory," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1475-1502, August.

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