Index futures and options and stock market volatility

Price discovery and volatility spillovers in index futures markets: Some evidence from Mexico

“…In addition, they argue that futures markets provide important information to investors on subsequent movements in spot prices, enabling them to more effectively manage exposure to cash market risks (see also Darrat and Rahman, 1995;Pericli and Koutmos, 1997;Darrat et al, 2002).…”

Index Future Trading, Spot Volatility And Market Efficiency

“…On the other hand, Weller and Yano (1987) conduct a general equilibrium analysis and find that the listing of futures market may reduce cash market volatility and how large does this volatility reduction impact may depend on people's risk preference to income. Pericli and Koutmos (1997) suggest that it is possible that derivatives increase market liquidity by bringing more investors to the cash market and thus resulting in a less volatile spot market.…”

“…They suggest that the index futures trading is not a force behind the increase of jump volatility. Excluding the 1987 stock crash, Pericli and Koutmos (1997) employ an E-GRACH model to study the effect of index futures on the volatility of S&P 500 in the period between 1953 and 1994. They conclude that the introduction of index futures produced no further structural changes on either the conditional or unconditional variance.…”

The Impact of the Launch of Chin’s CSI 300 Index Futures on the Volatility of CSI 300 Stock Index

“…Meanwhile, they also proved that the stock index futures can improve the liquidity of the stock market. Pericli and Kourinos (1997) [15] chose the S&P index as the sample and used nonparametric GARCH models to study the impact caused by stock index futures. The research suggested that the conditional or unconditional variance of the S&P 500 index had no significant change except in October 1987, which showed the stock index futures caused no obvious impact on the stock market's volatility.…”