Index Future Trading and Spot Market Volatility in Frontier Markets: Evidence from Ho Chi Minh Stock Exchange

Loc Dong Truong (), Anh Thi Kim Nguyen () and Dut Van Vo ()
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Loc Dong Truong: Can Tho University
Anh Thi Kim Nguyen: An Giang University, Vietnam National University Ho Chi Minh City
Dut Van Vo: Can Tho University

Asia-Pacific Financial Markets, 2021, vol. 28, issue 3, No 2, 353-366

Abstract: Abstract This study investigates the impact of index futures trading on the spot market volatility for Ho Chi Minh Stock Exchange (HOSE). The data used in this study are daily VN30-Index, future trading volume and open interests covering the period from March 18th, 2015 to January 2nd, 2020. In order to capture the asymmetric effect, the EGARCH(1,1) model is employed in this study. It is found that the introduction of index future trading leads to the increase the spot market volatility. In addition, our empirical findings reveal that the impact of recent news on spot market volatility in the post-index future period is greater that than the pre-index future period; and the market volatility in the post-futures period is more persistent than in the pre-futures period. Moreover, the level of asymmetric effect on the market volatility in the post-index future period is significantly lower than that for the pre-index futures period. Finally, the results derived from the Granger causality test confirm that the bi-directional causality relation between the spot market volatility and the future trading activity exists in HOSE.

Keywords: Index future introduction; Spot market volatility; EGARCH; HOSE (search for similar items in EconPapers)
JEL-codes: G10 G13 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10690-020-09325-1

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