The effect of futures trading on the distribution of spot index returns: Implications for CVaR in the Spanish market

Manuel Illueca () and Juan Angel Lafuente

Journal of Futures Markets, 2007, vol. 27, issue 9, 839-866

Abstract: There is extensive empirical research on the potential destabilizing effects of futures trading activity on spot market volatility. Rather than just focusing on spot volatility, the authors deal with the contemporaneous relationship between futures trading volume and the overall probability distribution of spot market returns. Empirical evidence using intraday data from the Spanish stock index futures market over the period 2000–2002 is provided. Their findings reveal that the density function of spot return conditional to spot volume depends on unexpected futures trading volume.

Date: 2007
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