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

Zhong, Maosen; Darrat, Ali F.; Otero, Rafael

doi:10.1016/j.jbankfin.2004.05.001

Cited by 163 publications

(39 citation statements)

References 39 publications

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“…Due to the advantages of low transaction costs, high leverage effect and high liquidity, many existing studies find that the index futures market tends to lead the underlying index spot market and plays a more important role of price discovery, for example, Pizzi et al [1], Kim et al [2], Brooks et al [3], Antoniou et al [4], Chatrath et al [5], Zhong et al [6], etc. studied the price causal relationships between the index futures and spot markets in America and other countries and got the above results and thus suggested that futures prices reflect new information faster and contain useful lead information for subsequent spot prices, including information not yet inserted in current spot prices.…”

Section: Introductionmentioning

confidence: 99%

Intraday dynamic relationships between CSI 300 index futures and spot markets: a high-frequency analysis

Zhou

2015

Neural Comput & Applic

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Based on intraday 5-min high-frequency dataset, this paper empirically analyzes the intraday dynamic relationships between China's CSI 300 index futures and spot markets with vector autoregression (VAR) and multivariate GARCH (MGARCH) models. By comparing four VAR-MGARCH models (dynamic conditional correlation, constant conditional correlation, diagonal and BEKK), the VAR-DCC-MGARCH model is found to fit the data the best and be preferred over the other models. The results of this model show that although there are bidirectional price causal relationships between the CSI 300 index futures and spot markets, the index futures return shock affects the spot market more severely than the spot return shock affects the futures market, indicating that the index futures market dominates the price discovery process between the two markets. There are bidirectional volatility spillovers effects between the CSI 300 index futures and spot markets, and the spillovers effects from index futures to spot almost equal to that from index spot to futures. The time-varying conditional correlations between the CSI 300 index futures and spot markets change from 0.4787 to 0.9594 across time, showing there is a strong positive correlation and linkage effect between the two markets. These results indicate that after a period of time of development, the price discovery performance of the CSI 300 index futures market has begun to function well, and the impact of the CSI 300 index futures market on its underlying spot market has strengthened.

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Section: Introductionmentioning

confidence: 99%

Intraday dynamic relationships between CSI 300 index futures and spot markets: a high-frequency analysis

Zhou

2015

Neural Comput & Applic

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“…Regarding the spillover effects between stock markets and futures markets, Chan et al [9] showed a significant intermarket dependence in the volatility of S &P 500 stock index and stock index futures markets. As for the approach of modified EGARCH models, Zhong et al [10] estimated the spot market and futures market of the Mexican stock index for spillover effects. Thus, futures price was proved a useful discovery instrument.…”

Section: Literature Reviewmentioning

confidence: 99%

“…These studies include Wei et al [7], Bhar and Nikolova [6], and Korkmaz et al [8] studied about stocks. Chan et al [9] and Zhong et al [10], Kanas [11] and Zhang et al [12] examined futures and commodities. Therefore, this section presents the empirical evidence that ETFs and their precious metal indices represent unilateral or bilateral influence through positive and negative effects on each other.…”

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confidence: 99%

Testing Leverage and Spillover Effects in Precious Metal ETFs

Chen¹,

Trang²

2018

TEL

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This research employed the Generalized Autoregressive Conditional Heteroskedasticity-in-Mean-Autoregressive Moving Average (GARCH-M-ARMA) and the Exponentially Generalized Autoregressive Conditional Heteroskedasticity-in-Mean-Autoregressive Moving Average (EGARCH-M-ARMA) models to investigate the spillover and leverage effects in the returns and volatilities of precious metal (base metal) ETFs. Significant positive relationships were found between precious metal (base metal) ETFs and precious metal (base metal) price indices. Further, the positive relationship between risk and return was illustrated in daily precious metal (base metal) ETFs.

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“…All closing prices of futures series are taken for the nearest contract to maturity (see Zhong, Darrat and Otero, 2004 …”

Section: Datamentioning

confidence: 99%

“…In the event of any departures from equilibrium due to exogenous shocks, price discovery also takes into account the speed of adjustment of a market towards equilibrium price. Econometrically, such process is called as error correction mechanism (see, Zhong, Darrat, and Otero, 2004;Rittler, 2012). Besides, price discovery, volatility spillover also plays important role in information transmission as it highlights the process through which volatility in one market affects that of another market (Chan, Chan and Karolyi, 1991).…”

Section: Introductionmentioning

confidence: 99%

An Examination of Price Discovery and Volatility Spillovers of Crude Oil in Globally Linked Commodity Markets

Sehgal¹,

Berlia

Ahmad³

2013

IJEF

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This paper examines the price discovery and volatility spillovers between spot and futures as well as futures prices of three strategically linked oil markets viz., ICE, MCX and NYMEX from 05 February, 2006 to 15 October, 2012. The results confirm the long-run relationship between futures and spot prices in each market, futures prices lead spot prices in the price discovery process. Analysing the futures prices, we find that ICE is the most dominant futures trading platform followed by NYMEX and MCX in price discovery process. Thus, MCX an emerging market platform seems to act like a satellite market vis-à-vis international platforms. The volatility spillover results suggest that there is a long-term spillover from ICE to MCX and from MCX to NYMEX. The volatility information seems to flow from NYMEX to ICE. The GARCH-CCC & DCC model results confirm both cross market and with in market co-movements which become weak during the crisis period and tend to become stronger during the stable period. The study provides relevant implications for policy makers and market traders. The outcome of this study contributes to commodity market literature especially relating to information transmission between strategically linked markets.

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

Cited by 163 publications

References 39 publications

Intraday dynamic relationships between CSI 300 index futures and spot markets: a high-frequency analysis

Intraday dynamic relationships between CSI 300 index futures and spot markets: a high-frequency analysis

Testing Leverage and Spillover Effects in Precious Metal ETFs

An Examination of Price Discovery and Volatility Spillovers of Crude Oil in Globally Linked Commodity Markets

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