How does news flow affect cross-market volatility spillovers? Evidence from China’s stock index futures and spot markets

Xinmiao Zhou, Junru Zhang and Zhaoyong Zhang

International Review of Economics & Finance, 2021, vol. 73, issue C, 196-213

Abstract: This paper examines how news flow affects cross-market volatility spillovers and price discovery process in China’s stock market and index futures market. We find robust evidence confirming dominant predicting power of the stock market in the price discovery process, and presence of asymmetric and persistent volatility effects. The results show that volatility spillovers are bidirectional between stock index futures and spot prices, and news release has significant and positive association with the dynamic conditional correlation between the index spot and the index futures markets. These have important implications for effective hedging and portfolio management decision in emerging markets.

Keywords: Chinese stock index futures market; Price discovery; Volatility spillover effect; Public information arrival (search for similar items in EconPapers)
JEL-codes: C14 C32 G1 G10 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:73:y:2021:i:c:p:196-213

DOI: 10.1016/j.iref.2021.01.003

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