A Study on the Price Discovery and Asymmetric Volatility Spillovers between Single-Stock Futures and Spot Markets: Focused on Korea‘s 4 Financial Holding Companies

Hong Chung-Hyo (Kyungnam University)

Journal of Derivatives and Quantitative Studies: 선물연구

ISSN: 1229-988X

Article publication date: 31 August 2011

Abstract

This paper investigated the price discovery and asymmetric volatility spillover effects between single stock futures and spot markets. For this purpose we employ 4 largest Korean financial holding companies's daily data covering the period from May 7, 2008 to the end of December, 2010. We introduce the Nelson (1991)'s Exponential GARCH models and the major empirical results are as follows; First, according to Johansen co-integration test, there is a long run relationship between the level variables of 4 financial holding companies' futures and cash markets. Second, based on Granger causality test, 3 financial holding companies's futures contracts among 4 have an impact on the spot returns at a significant level. Third, financial holding companies' futures and spot markets are influenced at 10% to 27% by previous price changes of each market. Fourth, there is a asymmetric volatility spillover effects in 4 financial holding companies futures markets. From this result we infer that individual futures and spot markets in banking area are more sensitive to bad news than good news. These empirical results are consistent with the those of Sakthivel and Kamaiah (2010), Chan et al.(1991), Lien and Tse (2000), Yang et al.(2001) and from these results we infer that 4 single stock futures market are more efficient than those of there spot markets.

Keywords

Citation

Chung-Hyo, H. (2011), "A Study on the Price Discovery and Asymmetric Volatility Spillovers between Single-Stock Futures and Spot Markets: Focused on Korea‘s 4 Financial Holding Companies", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 19 No. 3, pp. 281-308. https://doi.org/10.1108/JDQS-03-2011-B0003

Publisher

:

Emerald Publishing Limited

Copyright © 2011 Emerald Publishing Limited

License

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