Volatility Spillover Between the FTSE/JSE Top 40 Index and Index Futures: A Bekk-Garch and DCC-Garch Approach

K. McCullough, M. Murray and B. Strydom

Studies in Economics and Econometrics, 2018, vol. 42, issue 1, 63-86

Abstract: Understanding how information, and specifically volatility, flows between markets is of obvious interest to market participants. Given the importance of the FTSE/JSE Top 40 index as a barometer of the performance of the Johannesburg Stock Exchange (JSE) in South Africa, this paper investigates the volatility characteristics and volatility spillover effects between it and its corresponding futures contracts. A BEKK-GARCH approach is adopted to model volatility spillover effects, and the DCC-GARCH model applied as a confirmatory analysis of the BEKK-GARCH findings. Volatility spillover flows from the futures market to the index market, indicating that the FTSE/JSE Top 40 futures is the more informationally efficient market.

Date: 2018
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DOI: 10.1080/10800379.2018.12097327

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