The Effects of Index Futures Trading Volume on Spot Market Volatility in a Frontier Market: Evidence from Ho Chi Minh Stock Exchange

Loc Dong Truong (), H. Swint Friday and Anh Thi Kim Nguyen
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Loc Dong Truong: College of Economics, Can Tho University, Can Tho City 94115, Vietnam
H. Swint Friday: RELLIS Campus, Texas A&M University, Bryan, TX 77807, USA
Anh Thi Kim Nguyen: Faculty of Economics and Business Administration, An Giang University, Vietnam National University Ho Chi Minh City, Long Xuyen City 90116, Vietnam

Risks, 2022, vol. 10, issue 12, 1-13

Abstract: This analysis is the first to investigate the influence of index futures trading volume on spot market volatility for the Ho Chi Minh Stock Exchange (HOSE). The data utilized in this study are the daily VN30-Index futures contract trading volume starting at the inception date for the VN30-Index futures contract, 10 August 2017 and going through 10 August 2022. Using an autoregressive distributed lag (ARDL) bounds testing approach, the empirical findings reveal a positive relation between VN30-Index futures trading volume and the volatility of the spot market for the HOSE in the short-run. In addition, the results of the ARDL tests confirm in for the long-run, trading volume of futures contracts has a significant positive influence on spot market volatility. Moreover, the results derived from the error correction model (ECM) indicate that only 5.54% of the disequilibria from the previous trading day are converged and corrected back to the long-run equilibrium from the current day. Based on the findings, we recommend that Vietnamese policymakers establish relevant intervention polices on speculation of individual investors in order to provide stabilization safeguards for the underlying stock market.

Keywords: futures trading volume; spot market volatility; ARDL; HOSE (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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