Informational efficiency and spurious spillover effects between spot and derivatives markets

Vasilios Sogiakas and George Karathanassis

Global Finance Journal, 2015, vol. 27, issue C, 46-72

Abstract: Derivatives markets produce the means for price discovery as leading indicators in the transmission of new information. Examining volatility spillovers between spot and derivatives markets without accounting for possible disequilibria in the long term relationship could potentially result in spurious spillover effects. Our paper aims to contribute in this literature by controlling for possible disturbances in the long-run equilibrium relationship between the two markets. By application of a regime shift approach we provide evidence of a time varying spillover effect from derivatives to spot markets. However, this effect is inconclusive in the absence of a significant (1 −1) cointegration relationship.

Keywords: Spurious spillover effects; Derivatives markets; Regime shift (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:27:y:2015:i:c:p:46-72

DOI: 10.1016/j.gfj.2015.04.004

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