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The impact of futures trading on spot index volatility: evidence for Taiwan index futures

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  • Min-Hsien Chiang
  • Cheng-Yu Wang

Abstract

This paper investigates the influences of inception of Taiwan Index futures trading on the spot price volatility on the Taiwan Stock Exchange (TSE). The macroeconomic effects are controlled and the asymmetric response behaviour is studied. The empirical evidence shows that the trading of TAIEX futures has major impacts on spot price volatility mechanism while the trading of MSCI Taiwan futures does not. In addition, the trading of both index futures has altered the asymmetric response behaviour of spot price volatility.

Suggested Citation

  • Min-Hsien Chiang & Cheng-Yu Wang, 2002. "The impact of futures trading on spot index volatility: evidence for Taiwan index futures," Applied Economics Letters, Taylor & Francis Journals, vol. 9(6), pages 381-385.
    • Handle: RePEc:taf:apeclt:v:9:y:2002:i:6:p:381-385
    DOI: 10.1080/13504850110068837
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    Cited by:

    1. Bohl, Martin T. & Diesteldorf, Jeanne & Siklos, Pierre L., 2015. "The effect of index futures trading on volatility: Three markets for Chinese stocks," China Economic Review, Elsevier, vol. 34(C), pages 207-224.
    2. Sila Alan, Nazli & Karagozoglu, Ahmet K. & Korkmaz, Sibel, 2016. "Growing pains: The evolution of new stock index futures in emerging markets," Research in International Business and Finance, Elsevier, vol. 37(C), pages 1-16.
    3. Spyros I. Spyrou, 2005. "Index Futures Trading and Spot Price Volatility," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 4(2), pages 151-167, August.
    4. repec:ebl:ecbull:v:7:y:2007:i:10:p:1-14 is not listed on IDEAS
    5. Wen-Hsiu Kuo & Hsinan Hsu & Min-Hsien Chiang, 2008. "Foreign investment, regulation, volatility spillovers between the futures and spot markets: evidence from Taiwan," Applied Financial Economics, Taylor & Francis Journals, vol. 18(5), pages 421-430.
    6. Karathanassis, George & Sogiakas, Vasilios, 2007. "Spill Over Effects of Futures Contracts Initiation on the Cash Market: A Comparative Analysis," MPRA Paper 5958, University Library of Munich, Germany.
    7. George Karathanassis & Vasilios Sogiakas, 2010. "Spill over effects of futures contracts initiation on the cash market: a regime shift approach," Review of Quantitative Finance and Accounting, Springer, vol. 34(1), pages 95-143, January.
    8. Yung-Shi Liau & Jack Yang, 2008. "The mean/volatility asymmetry in Asian stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 18(5), pages 411-419.
    9. Dr. Dhanya Alex & Dr. Roshna Varghese, 2015. "Derivative Trading and Spot Market Volatility: Evidence from Indian Market," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 1(3), pages 23-34, August.

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