Volatility Spillover between the KOSPI 200 Spot and Futures Markets Using the VECM-DCC-GARCH Model

Sang Hoon Kang (Pusan National University)
Seong-Min Yoon (Pusan National University)

Journal of Derivatives and Quantitative Studies: 선물연구

ISSN: 1229-988X

Article publication date: 31 August 2011

Abstract

This paper investigates the price discovery, volatility spillover, and asymmetric volatility spillover effects between the KOSPI 200 market and its futures contracts market. The investigation was performed using the VECM-DCC-GARCH approach. In the case of returns, we found a significant unidirectional information flow from the futures market to the spot market; this implies that the KOSPI 200 futures market plays an important role on the price discovery in the spot market. In addition, we found a strong bi-directional casualty involving the volatility interaction between the spot and futures markets; this implies that market volatility originating in the spot market will influence the volatility of the futures market and vice versa. We also found strong asymmetric volatility spillover effects between the two markets.

Keywords

Citation

Kang, S.H. and Yoon, S.-M. (2011), "Volatility Spillover between the KOSPI 200 Spot and Futures Markets Using the VECM-DCC-GARCH Model", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 19 No. 3, pp. 233-249. https://doi.org/10.1108/JDQS-03-2011-B0001

Publisher

:

Emerald Publishing Limited

Copyright © 2011 Emerald Publishing Limited

License

This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode