Volatility Impact of Stock Index Futures Trading - A Revised Analysis

Helmut Wagner and Eva Matanovic

MPRA Paper from University Library of Munich, Germany

Abstract: The recent financial crisis renewed concerns about a possible destabilizing impact of derivatives trading. Despite a very active research, the question whether or not derivatives tend to destabilize financial markets has not yet been answered to satisfaction. This contribution aims to revise the robustness of recent empirical findings and to remedy some methodological shortcomings of earlier studies. Acknowledging their practical relevance, we focus on futures and examine the volatility impact of DAX futures trading. Our results confirm a volatility-reducing impact of DAX futures trading, whereas the observed deterioration of the fundamental price building process proved to be statistically insignificant.

Keywords: Financial market stability; financial market volatility; GARCH; stock index futures; derivatives (search for similar items in EconPapers)
JEL-codes: G10 G13 G14 G15 G19 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

Published in Journal of Applied Finance & Banking 5.2(2012): pp. 113-126

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:51204

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