THE IMPACT OF SINGLE STOCK FUTURES ON SPOT PRICE VOLATILITY OF UNDERLYING STOCK IN THE STOCK EXCHANGE OF THAILAND DURING 2006 - 2012
Article Sidebar
Main Article Content
Abstract
The impact of the Stock Futures Trading to spot market has been considered by many countries all around the world. The debate on whether Stock Futures destabilizes or stabilizes the spot market has been well established in the developed market and emerging market on the Stock Index level. This research aims to examine the impact of the introduction of the Single Stock Futures on the volatility of the underlying equity in the Stock Exchange of Thailand from year 2006 to 2012, using the GARCH model. Based on (GARCH 1,1) model analysis, this study showed the introduction of Single Stock Futures stabilized the spot market volatility in Thailand. The coefficient γ of all 11 stocks shows a statistically significant level. Additionally, the SET Index was included and set up another model to test as another factor that causes volatility and found post-futures period volatility in the spot market decreased after an introduction of Single Stock Futures trading. In conclusion, the introduction of Single Stock Futures trading decreases the spot price volatility in the market. By considering (SET) as market factors, the results also found most Single Stock Futures trading also decreases the spot price volatility.
Downloads
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
The submitting author warrants that the submission is original and that she/he is the author of the submission together with the named co-authors; to the extend the submission incorporates text passages, figures, data, or other material from the work of others, the submitting author has obtained any necessary permission.
Articles in this journal are published under the Creative Commons Attribution License (CC-BY What does this mean?). This is to get more legal certainty about what readers can do with published articles, and thus a wider dissemination and archiving, which in turn makes publishing with this journal more valuable for you, the authors.
References
Antonios Antoniou, Phil Holmes (1992). Futures trading, information and spot price volatility: evidence for
the FTSE-100 Stock Index Futures contract using GARCH. Journal of Banking & Finance 19 (1995), 117-129.
Bae, S. C., Kowan, T. H., & Park, J. W. (2004). Futures trading, spot market volatility, and market efficiency: the case of the Korean index futures markets. The Journal of Futures Markets, 2412, 1915–1228.
Beer, J. D.(2009). Changes in the volatility level and structure of share post single stock futures trading. Corporate Ownership & Control, 72, 296-311.
Bessembinder H. and Seguin P.J. (1992). Futures-Trading Activity and Stock Price Volatility. The Journal of Finance, 47, No. 5.
Bollerslev, T. (1986). Generalised autoregressive conditional heteroscedasticity. Journal of Econometrics, 33, 307-327.
Danthine, J.(1978). Information, futures prices, and stabilizing speculation. Journal of Economic Theory ,17,79-98.
Engle, R.F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation. Econometrica , 50, 987-1008.
Engle, R. F. and T. Bollerslev. (1986). Modelling the persistence of conditional variances. Econometric
Reviews ,5, 1-50.
Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25, 383-417.
Robbani, M.G. and Bhuyan, R. (2005). Introduction of Futures and Options on Stock Index and their Impact on
Trading Volume and Volatility: Empirical Evidence from DJIA Components. Derivatives Use, Trading and Regulations, 113, 245- 260.
Sathya Swaroop Debasish.(2009). Effect of futures trading on spot-price volatility: evidence for NSE Nifty using GARCH. The Journal of Risk Finance, Vol. 10 No. 1 2009 , 67-77.
Schwert, G. W. (1990). Stock market volatility, Financial Analyst Journal, 46, 23-34.
Spyros I. Spyrou (2005). Index Futures Trading and Spot Price Volatility : Evidence from an Emerging Market, Journal of Emerging Market Finance, 4.
Smith, C. W. (1989). Market Volatility: and Causes and consequences. CornellLaw Review, 74, 953-962.
Stoll, H. and Whaley R. (1990). The Dynamics of Stock Index and Stock Index Futures Returns, The Journal
of Financial and Quantitative Analysis, 25, 441-468.
Yilgor, A. & Mebounou, C. (2016). The Effect of Futures Contracts on the Stock Market Volatility. Journal of Business Economics and Finance , 5 , 307-317.