 The Effects of Derivatives Trading on Stock Market Volatility and Market Efficiency: Some Evidence from European MarketsGiovanni Liccardo Chapter 2 in Asset Pricing, Real Estate and Public Finance over the Crisis, 2013, pp 25-37 from Palgrave Macmillan Abstract: Abstract The impact of derivative trading on the volatility of the underlying assets is an issue that has long interested academics, regulators and investors. In particular, media and policy makers are concerned about how futures and options may affect the underlying spot market. In fact, it is believed that derivatives’ trading attracts speculators who can destabilize spot prices, allowing them to use the leverage and requiring only a margin of the entire position held. It has been demonstrated that most of the speculative activity has shifted from the cash market to the derivatives market that, for the reasons given above, provides more facilities for speculation. These concerns support the idea that greater regulation of the derivatives market is needed. However, first of all it is important to understand if there is a causal link between the introduction of derivative instruments and the volatility of the underlying stock market. Keywords: Stock Index; GARCH Model; Future Trading; Derivative Market; Index Volatility (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-1-137-29377-0_3 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Palgrave Macmillan Studies in Banking and Financial Institutions from Palgrave Macmillan |
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