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

Zhong, Maosen, Darrat, Ali F. and Otero, Rafael (2004) Price discovery and volatility spillovers in index futures markets: Some evidence from Mexico. Journal of Banking & Finance, 28 12: 3037-3054. doi:10.1016/j.jbankfin.2004.05.001


Author Zhong, Maosen
Darrat, Ali F.
Otero, Rafael
Title Price discovery and volatility spillovers in index futures markets: Some evidence from Mexico
Journal name Journal of Banking & Finance   Check publisher's open access policy
ISSN 0378-4266
Publication date 2004-01-01
Sub-type Article (original research)
DOI 10.1016/j.jbankfin.2004.05.001
Volume 28
Issue 12
Start page 3037
End page 3054
Total pages 18
Editor G. P. Szegoe
Place of publication Netherlands
Publisher Elsevier Science
Collection year 2004
Language eng
Subject C1
350301 Finance
710401 Finance and investment services
Abstract This paper investigates the hypotheses that the recently established Mexican stock index futures market effectively serves the price discovery function, and that the introduction of futures trading has provoked volatility in the underlying spot market. We test both hypotheses simultaneously with daily data from Mexico in the context of a modified EGARCH model that also incorporates possible cointegration between the futures and spot markets. The evidence supports both hypotheses, suggesting that the futures market in Mexico is a useful price discovery vehicle, although futures trading has also been a source of instability for the spot market. Several managerial implications are derived and discussed. (C) 2004 Elsevier B.V. All rights reserved.
Keyword Business, Finance
Economics
Stock Index Futures
Emerging Markets
Cointegration
Error Correction
Egarch
Stock Index
Conditional Heteroskedasticity
Cointegration Approach
Spot
Dynamics
Returns
Models
Cash
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
2005 Higher Education Research Data Collection
UQ Business School Publications
 
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Citation counts: TR Web of Science Citation Count  Cited 33 times in Thomson Reuters Web of Science Article | Citations
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Created: Wed, 15 Aug 2007, 13:21:58 EST