Simultaneous volatility transmissions and spillover effects: U.S. and Hong Kong stock and futures markets

Previous studies on spillover effects in future markets have so far confined themselves to static analyses. In this study, we use a newly introduced spillover index to examine dynamic spillovers between spot and futures market volatility, volume of futures trading and open interest in the UK and the US. Based on a dataset over the period February 25, 2008 to March 14, 2013, that encompasses both the global financial crisis and the Eurozone debt crisis, we find that spot and futures volatilities in the UK (US) are net receivers (net transmitters) of shocks to volume of futures trading and open interest. The analysis also sheds light on the dynamic interdependence of spot and futures market volatilities between the US and the UK. Specifically, the spot and futures volatility spillovers between the UK and US markets are of bidirectional nature, however, they are affected by major economic events such as the global financial and Eurozone debt crisis. Several robustness checks endorse our main findings. Overall, these results have important implications for various market participants and financial sector regulators.

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confidence: 99%

Dynamic spillover effects in futures markets: UK and US evidence

Antonakakis

Floros

Kizys

2016

“…In addition, it is evident that these shortcomings of the correlation measurement as an indicator of interdependence may have far reaching consequences for the empirical asset pricing literature where heretofore these shortcomings have been neglected (Grandes et al 2010, de los Rios A.D., 2009, Saleem and Vaihekoski, 2008, Goriaev and Zabotkin, 2006, Dvorak and Podpiera, 2006and Dey, 2005 as well as the stock market integration and contagion literatures (Singh et al, 2010, Alagidede and Panagiotidis, 2009, Cajueiro et al, 2009, Lin and Swanson, 2008, Chuang et al, 2007, Tai, 2007, Gannon, 2005, Kearney and Lucey, 2004, Hasan and Schmiedel, 2004, Swanson, 2003 and those contributions which seek to explicate the correlation structure as dependent on economic freedom, cultural distance, the legal framework or network strategies (Smimou and Karabegovic, 2010, Lucey and Zhang, 2010and Buchanan, 2007, Hasan and Schmiedel, 2004. In summary, these latter contributions, while valuable in their own right, are incapable of reflecting long-run relations which are not necessarily consistent with the documented short-run relations estimated in these studies.…”

Section: Accepted M Manuscriptmentioning

confidence: 99%

Robust global stock market interdependencies

Lucey

Muckley

2011

In this paper, we examine the scope for international stock portfolio diversification, from the viewpoint of a United States representative investor, in regard to both the Asian and the European stock markets. Our findings indicate that despite correlation style evidence to the contrary, the European stock markets provide a superior long-term diversification opportunity relative to that provided by the Asian stock markets. Hence, a short-term measurement of interdependence appears to be uninformative with respect to the diversification opportunities of investors with longer term investment horizons. In terms of methodology, we adopt common stochastic trend tests, including a common stochastic trend test which accounts for generalised autoregressive conditional heteroskedasticity effects in conjunction with the recursive estimation of these tests to estimate the development of longterm stock market interdependence linkages. Recursively estimated robust correlations between the international stock markets are utilised to reveal the nature of short-term stock market interdependence linkages.

“…The issues of information transmission across markets with non-overlapping stock exchange trading hours, i.e. same day effect and meteor shower effect, are not explored well in literature employing futures data (e.g., Pan & Hsueh, 1998;Wu et al, 2005;Gannon, 2005;.…”

Section: Introductionmentioning

confidence: 99%

Asymmetry in spillover effects: Evidence for international stock index futures markets

Yarovaya

Brzeszczyński

Lau

2017

The paper investigates the asymmetry in return and volatility spillovers across futures markets with non-overlapping stock exchange trading hours. The transmission of positive and negative return and volatility shocks is analysed for 104 channels of information conveyance identified by combining 9 developed and 11 emerging markets in markets pairs with nonoverlapping trading hours. The asymmetric causality test is employed to daily stock index futures returns and volatilities for the period from 03 October 2010 to 03 October 2014. The paper sheds the light on the relatively little explored concept of asymmetry in return and volatility spillovers across markets, providing the novel evidence on stabilizing and destabilizing spillover effects.