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Index Future Trading and Spot Market Volatility in Frontier Markets: Evidence from Ho Chi Minh Stock Exchange

Author

Listed:
  • Loc Dong Truong

    (Can Tho University)

  • Anh Thi Kim Nguyen

    (An Giang University, Vietnam National University Ho Chi Minh City)

  • Dut Van Vo

    (Can Tho University)

Abstract

This study investigates the impact of index futures trading on the spot market volatility for Ho Chi Minh Stock Exchange (HOSE). The data used in this study are daily VN30-Index, future trading volume and open interests covering the period from March 18th, 2015 to January 2nd, 2020. In order to capture the asymmetric effect, the EGARCH(1,1) model is employed in this study. It is found that the introduction of index future trading leads to the increase the spot market volatility. In addition, our empirical findings reveal that the impact of recent news on spot market volatility in the post-index future period is greater that than the pre-index future period; and the market volatility in the post-futures period is more persistent than in the pre-futures period. Moreover, the level of asymmetric effect on the market volatility in the post-index future period is significantly lower than that for the pre-index futures period. Finally, the results derived from the Granger causality test confirm that the bi-directional causality relation between the spot market volatility and the future trading activity exists in HOSE.

Suggested Citation

  • Loc Dong Truong & Anh Thi Kim Nguyen & Dut Van Vo, 2021. "Index Future Trading and Spot Market Volatility in Frontier Markets: Evidence from Ho Chi Minh Stock Exchange," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(3), pages 353-366, September.
    • Handle: RePEc:kap:apfinm:v:28:y:2021:i:3:d:10.1007_s10690-020-09325-1
    DOI: 10.1007/s10690-020-09325-1
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    References listed on IDEAS

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    Cited by:

    1. Loc Dong Truong & H. Swint Friday, 2021. "The Impact of the Introduction of Index Futures on the Daily Returns Anomaly in the Ho Chi Minh Stock Exchange," IJFS, MDPI, vol. 9(3), pages 1-14, August.

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    More about this item

    Keywords

    Index future introduction; Spot market volatility; EGARCH; HOSE;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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