Does increased hedging lead to decreased price efficiency? The case of VIX ETPs and VIX futures

Adrian Fernandez‐Perez, Bart Frijns, Alireza Tourani‐Rad and Robert I. Webb
Authors registered in the RePEc Author Service: Alireza Tourani-Rad

The Financial Review, 2019, vol. 54, issue 3, 477-500

Abstract: We examine the impact of the introduction of VIX exchange‐traded products (ETPs) on the information content and pricing efficiency of VIX futures. We document that trades in VIX futures have become less informative and that pricing errors exhibit more persistence after the introduction of VIX ETPs. In addition, we observe that the price process of the VIX futures has become noisier over time. These findings suggest that the introduction of the VIX ETPs had a prominent effect on the properties and dynamics of the VIX futures.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:54:y:2019:i:3:p:477-500

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