EconPapers    
Economics at your fingertips  
 

Does the Introduction of Stock Index Futures Destabilize the Spot Market? Some Cross-Country Evidence from Asia

Yan Dong (), Cijun Fan and Dayong Zhang ()

Chinese Economy, 2016, vol. 49, issue 5, 374-394

Abstract: The role of stock index futures (SIFs) in the stock market is very much under debate in the literature. This article studies the effect of the introduction of SIFs to the spot market in China and six other Asian markets. Based on the previous literature, we develop a hypothesis that in a bull market in which bubbles and noise traders are more likely to exist, the introduction of SIFs as an arbitrage instrument may cause price reversal and increase short-term volatility in the underlying market. We examine China and six other major stock markets in Asia to test this hypothesis. Pre- and post-launch standard volatility comparison, rolling windows estimation of volatility, and Markov Switching ARCH estimation are employed in our empirical analysis. Our results are found to support our hypothesis.

Date: 2016
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1080/10971475.2016.1193393 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:chinec:v:49:y:2016:i:5:p:374-394

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MCES20

DOI: 10.1080/10971475.2016.1193393

Access Statistics for this article

More articles in Chinese Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2021-11-27
Handle: RePEc:mes:chinec:v:49:y:2016:i:5:p:374-394