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Index Futures Trading and Spot Market Volatility:Evidence from the Swedish Market

Li, Ming and Carlson, Andrew (2008)
Department of Economics
Abstract
This paper investigates the effect of the introduction of the Swedish OMXS 30 Index Futures Market on the volatility of the OMXS 30 Index Spot Market. The futures market was introduced in April 1987 and this paper will use the ARCH family of models to test if spot market volatility increased, decreased, or stayed the same in the period after the futures were introduced. A discussion of previous theories and studies is followed by an analysis of the Swedish market. The data description and methodology are followed by the empirical testing and results which indicate that there was no change in the volatility of the OMXS 30 spot market due to the introduction of the futures market. The paper concludes by discussing the possible reasons why... (More)
This paper investigates the effect of the introduction of the Swedish OMXS 30 Index Futures Market on the volatility of the OMXS 30 Index Spot Market. The futures market was introduced in April 1987 and this paper will use the ARCH family of models to test if spot market volatility increased, decreased, or stayed the same in the period after the futures were introduced. A discussion of previous theories and studies is followed by an analysis of the Swedish market. The data description and methodology are followed by the empirical testing and results which indicate that there was no change in the volatility of the OMXS 30 spot market due to the introduction of the futures market. The paper concludes by discussing the possible reasons why the introduction of the futures market did not impact spot volatility which include the trading mechanisms of the OMXS 30 futures market, the types of investors trading, and the characteristics of the data sample. (Less)
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author
Li, Ming and Carlson, Andrew
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
GARCH, volatility, Futures index trading, Swedish market, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
language
English
id
1337593
date added to LUP
2008-06-05
date last changed
2010-08-03 10:51:45
@misc{1337593,
  abstract     = {This paper investigates the effect of the introduction of the Swedish OMXS 30 Index Futures Market on the volatility of the OMXS 30 Index Spot Market. The futures market was introduced in April 1987 and this paper will use the ARCH family of models to test if spot market volatility increased, decreased, or stayed the same in the period after the futures were introduced. A discussion of previous theories and studies is followed by an analysis of the Swedish market. The data description and methodology are followed by the empirical testing and results which indicate that there was no change in the volatility of the OMXS 30 spot market due to the introduction of the futures market. The paper concludes by discussing the possible reasons why the introduction of the futures market did not impact spot volatility which include the trading mechanisms of the OMXS 30 futures market, the types of investors trading, and the characteristics of the data sample.},
  author       = {Li, Ming and Carlson, Andrew},
  keyword      = {GARCH,volatility,Futures index trading,Swedish market,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {Index Futures Trading and Spot Market Volatility:Evidence from the Swedish Market},
  year         = {2008},
}