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The impact of futures trading on volatility of the underlying asset in the Turkish stock market

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  • Kasman, Adnan
  • Kasman, Saadet

Abstract

This paper examines the impact of the introduction of stock index futures on the volatility of the Istanbul Stock Exchange (ISE), using asymmetric GARCH model, for the period July 2002–October 2007. The results from EGARCH model indicate that the introduction of futures trading reduced the conditional volatility of ISE-30 index. Results further indicate that there is a long-run relationship between spot and future prices. The results also suggest that the direction of both long- and short-run causality is from spot prices to future prices. These findings are consistent with those theories stating that futures markets enhance the efficiency of the corresponding spot markets.

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  • Kasman, Adnan & Kasman, Saadet, 2008. "The impact of futures trading on volatility of the underlying asset in the Turkish stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(12), pages 2837-2845.
    • Handle: RePEc:eee:phsmap:v:387:y:2008:i:12:p:2837-2845
    DOI: 10.1016/j.physa.2008.01.084
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    3. Ekin Tokat & Hakkı Arda Tokat, 2010. "Shock and Volatility Transmission in the Futures and Spot Markets: Evidence from Turkish Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(4), pages 92-104, January.
    4. Jing Hao & Xiong Xiong & Feng He & Feng Ma, 2019. "Price Discovery in the Chinese Stock Index Futures Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(13), pages 2982-2996, October.
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    6. Liu, Shengnan & Yang, Linshan & Gu, Rongbao, 2023. "Can the introduction of stock index futures stabilize the volatility of the stock market? Evidence from the Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 44-58.
    7. Selim Tuzunturk, 2009. "The relationship between volatility and volume on the Istanbul stock exchange," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 1(3), pages 289-304.
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    10. Babajide Fowowe, 2014. "Paper oil and physical oil: has speculative pressure in oil futures increased volatility in spot oil prices?," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 38(3), pages 356-372, September.
    11. Juan Benjamín Duarte Duarte & Juan Manuel Mascare?nas Pérez-Iñigo, 2014. "Comprobación de la eficiencia débil en los principales mercados financieros latinoamericanos," Estudios Gerenciales, Universidad Icesi, November.
    12. John Ryter & Xinkai Fu & Karan Bhuwalka & Richard Roth & Elsa Olivetti, 2022. "Assessing recycling, displacement, and environmental impacts using an economics‐informed material system model," Journal of Industrial Ecology, Yale University, vol. 26(3), pages 1010-1024, June.
    13. Crentsil Kofi Agyekum & Haifeng Huang & Jianshu Chen, 2017. "The impact of the Chinese cornstarch futures on spot market and corn futures market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1405580-140, January.
    14. Mustafa Okur & Emrah Cevik, 2013. "Testing Intraday Volatility Spillovers in Turkish Capital Markets: Evidence from Ise," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 26(3), pages 99-116, January.
    15. Shailesh Rastogi & Chaitaly Athaley, 2019. "Volatility Integration in Spot, Futures and Options Markets: A Regulatory Perspective," JRFM, MDPI, vol. 12(2), pages 1-15, June.
    16. Claudiu Tiberiu Albulescu & Daniel Goyeau, 2011. "Financial Volatility And Derivatives Products: A Bidirectional Relationship," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 2011, pages 57-69, july.
    17. Aysegul Ates, 2016. "Relation between ISE 30 index and ISE 30 index futures markets: Evidence from recursive and rolling cointegration," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(1), pages 35-42, February.
    18. Kang, Sang Hoon & Cheong, Chongcheul & Yoon, Seong-Min, 2013. "Intraday volatility spillovers between spot and futures indices: Evidence from the Korean stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(8), pages 1795-1802.
    19. Lahmiri, Salim, 2017. "Cointegration and causal linkages in fertilizer markets across different regimes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 181-189.
    20. Gong, Chen-Chen & Ji, Shen-Dan & Su, Li-Ling & Li, Sai-Ping & Ren, Fei, 2016. "The lead–lag relationship between stock index and stock index futures: A thermal optimal path method," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 444(C), pages 63-72.

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