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The effect of futures trading on the distribution of spot index returns: Implications for CVaR in the Spanish market

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  • M. Illueca
  • J.A. Lafuente

Abstract

There is extensive empirical research on the potential destabilizing effects of futures trading activity on spot market volatility. Rather than just focusing on spot volatility, the authors deal with the contemporaneous relationship between futures trading volume and the overall probability distribution of spot market returns. Empirical evidence using intraday data from the Spanish stock index futures market over the period 2000–2002 is provided. Their findings reveal that the density function of spot return conditional to spot volume depends on unexpected futures trading volume.

Suggested Citation

  • M. Illueca & J.A. Lafuente, 2007. "The effect of futures trading on the distribution of spot index returns: Implications for CVaR in the Spanish market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 27(9), pages 839-866, September.
    • Handle: RePEc:wly:jfutmk:v:27:y:2007:i:9:p:839-866
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    Cited by:

    1. Abdul Hakim & Michael McAleer, 2009. "VaR Forecasts and Dynamic Conditional Correlations for Spot and Futures Returns on Stocks and Bonds," CIRJE F-Series CIRJE-F-676, CIRJE, Faculty of Economics, University of Tokyo.
    2. Jack J. W. Yang & Chia-Hsing Huang & Chi-Hui Wang, 2013. "Nonlinear Relationships between Taiwan VIX Index and the Intraday Ordering Behavior of Stock Index Options," Business and Management Research, Business and Management Research, Sciedu Press, vol. 2(3), pages 68-80, September.

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