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Claudiu Albulescu (), Daniel Goyeau and Aviral Tiwari ()

Brussels Economic Review, 2013, vol. 56, issue 3-4, 349-364

Abstract: ABSTRACT:The present paper analyses the relationship between the volume of transactions with futuresequity index products and the return volatility of their underlying assets. The study addressesthe case of five stock markets, members of the Euronext.liffe. We employ a frequency domainanalysis to identify the direction of the causality. In addition, we test the relationship betweenthe volume of futures contracts and both negative and positive shocks in terms of the historicalvolatility of index returns. Our results indicate the frequency causality only in the case ofBrussels financial market. For Lisbon, the causality is present, but it is not validated by theconfidence level tests, while for London, Paris and Amsterdam, no causality can be observed. Inthe case of Brussels, the causality is bidirectional, both in the short and long run frequencies.The futures equity index volume Granger-causes the positive shocks in terms of volatility in thelong run and the negative shocks in the short run.

Keywords: Volatility; futures index products; frequency domain Granger causality; Euronext (search for similar items in EconPapers)
JEL-codes: C32 F37 G12 G15 (search for similar items in EconPapers)
Date: 2013
Note: Special Issue30th Symposium on Money, Banking and FinanceGuest editors: Christian Aubin, Noëlle Duport andDaniel Goyeau
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Working Paper: Revisiting The Financial Volatility – Derivative Products Relationship On Euronext. Liffe Using A Frequency Domain Analysis (2013) Downloads
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