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Determinants of Price Volatility of Futures Contracts: Evidence from an Emerging Market

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  • Eyup Kadioglu
  • Saim Kilic
  • Nurcan Ocal

Abstract

This paper examines the effects of time to maturity, volume and open interest on the price volatility of futures contracts in Turkish derivative markets. The determinant of volatility is tested using conditional variance models during the period from January 2, 2008 to June 30, 2015. The sample set consists of 457 futures contracts backed by gold, currency, indices and single stocks. Empirical results show that the time to maturity, volume and open interest significantly impact the volatility of futures contracts. It is found that as the maturity date approaches, volatility increases. Furthermore, a positive correlation is found between the price volatility of futures contracts and volume, whereas volatility and open interest are found to correlate negatively. Thus, both the Samuelson Hypothesis and the Mixture of Distributions Hypothesis are supported in Turkish derivative markets.

Suggested Citation

  • Eyup Kadioglu & Saim Kilic & Nurcan Ocal, 2016. "Determinants of Price Volatility of Futures Contracts: Evidence from an Emerging Market," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(2), pages 1-7.
    • Handle: RePEc:spt:apfiba:v:6:y:2016:i:2:f:6_2_7
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    Cited by:

    1. Jing Ao & Jihui Chen, 2020. "Price Volatility, the Maturity Effect, and Global Oil Prices: Evidence from Chinese Commodity Futures Markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(4), pages 627-654, October.
    2. Sanjay Sehgal & Tarunika Jain Agrawal, 2019. "Impact of Commodity Transaction Tax on Market Liquidity, Volatility, and Government Revenues: An Empirical Study for India," Vikalpa: The Journal for Decision Makers, , vol. 44(1), pages 12-29, March.

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