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This paper examines the information efficiency of KOSDAQ50 and KOSPI200 index futures markets. The study analyzes and compares both markets in three respects : 1) price discovery (lead-lag relationship between spot and futures markets.), 2) volatility-volume relationship, and 3) mispricings between spot and futures prices. The first, analysis shows the in the KOSPI200 market, futures price leads spot price. While spot price leads futures price in the KOSDAQ50 market. The second analysis shows that the volatility-volume relation is positive in the KOSPI200 futures market, supporting the hypothesis of mixture of distribution. In contrast, there is little relation between volume and volatility in the KOSDAQ50 futures market. This result casts doubt that the futures market price reflects information. The last analysis shows that the magnitude of mispricing becomes smaller with more volume in the KOSPI200 futures market, while it becomes larger with more volume in the KOSDAQ50 futures market. The overall results imply that the KOSDAQ50 futures market is less informationally efficient that the KOSPI200 market. The inefficiency appears due to the lack of institutional investor participation, especially securities firms, in making up the market.

Discusses the attractions of property to institutional investors. Describes the evolution of future markets from forward contracts in commodity markets and financial and stock market index futures to the current UK proposal for property index futures. Concludes that property professionals should make every effort to understand and develop the proposed market in a way which will benefit property investors most effectively.

The purpose of this paper is to examine whether futures markets play a dominant role in the price discovery process. The rate of convergence of information from one market to another is analyzed to infer the efficiency of futures as an effective hedging tool.

The paper uses a two‐regime threshold vector autoregression (TVAR) and a two‐regime threshold autoregression for six commodities. The regimes (or states) are defined around the expiration week of the futures contract.

This paper finds evidence for price discovery process happening in the futures market in five out of six commodities. However, the rate of convergence of information is slow, particularly in the non‐expiration weeks. For copper, gold and silver, the rate of convergence is almost instantaneous during the expiration week of the futures contract affirming the utility of futures contracts as an effective hedging tool. In case of chickpeas, nickel and rubber the convergence worsens during the expiration week indicating the non‐usability of futures contract for hedging.

This paper extends the framework developed by Garbade et al. by superimposing a two‐regime TVAR model to quantify the price discovery process. It is the first paper to analyze the differential impact of price discovery and convergence during expiration week (compared to non‐expiration weeks) for the Indian commodities market.

Holbrook Working (1949) discovered that the percentage change in futures prices seemed to be largelyrandom. This led Paul Samuelson (1965) to develop the Efficient Market Hypothesis (EMH) which claims that the current spot and futures1 prices fully reflect all relevant information. Furthermore, because the future flow of information cannot be anticipated, price changes will not be serially correlated. These papers linked the notion of randomness of price changes to informational efficiency. From that point on, a major part of the empirical studies of asset markets has been the application of time series analysis to asset prices, in order to evaluate whether the price changes are random and whether futures prices reflect all available information. As the statistical tests became more sophisticated, the number of empirical studies increased and the results became more contradictory and difficult to interpret. An economic theorist can only be bemused by contemplating the empirical/econometric studies in the finance literature.

The purpose of this paper is to analyze cointegration and causality relationships between spot and futures markets in Turkish foreign‐exchange markets.

The research employs Bounds cointegration test and Toda‐Yamamoto causality test to detect a possible risk transmission between spot and futures markets. Time series of Turkish spot and futures foreign‐exchange markets from January 2, 2006 to March 25, 2008 on a daily basis are used for empirical analysis.

The empirical tests suggest that there is unidirectional causality running from future exchange‐rate market to spot market implying that foreign‐exchange markets have informational efficiency in Turkey.

The paper has originality in both employing Bounds test and Toda‐Yamamoto test to examine the relationship between spots and derivative markets, and in being one of the first empirical papers examining Turkish futures markets. In addition, the paper presents a guide on how Bounds and Toda‐Yamamoto tests can be applied to detect interactions among markets without data stationarity.

This study explores the price linkage between the Chinese commodity futures market and other dominant futures markets, and examines the forces behind the price linkages. The contribution by the trading hour innovations in the United States (or United Kingdom) market to the overnight price changes in the Chinese market is larger in scale than the contribution by the daytime information from the Chinese market to the overnight returns of the corresponding US (or UK) market. Several futures have significant interactions of the domestic and foreign factors in the price linkages while the Chinese domestic factors explain better the global market price linkage in some futures (aluminum, gold, and corn), demonstrating the leading role of the Chinese futures markets in these world markets.

The paper aims to explore the informational role of futures volume in the simultaneous relationship between option volume and spot volatility to forecast the volatility of the underlying asset.

The generalized method of moments is used to estimate the simultaneous equations of endogeneity between spot volatility and option volume. Futures volume is specified as an exogenous variable in both legs of the estimation of simultaneous equations. However, the future volume is also tested as a dependent variable to prove preference for investment by informed investors in futures along with options.

The result indicates that futures volume has a significant association with the bi-directional simultaneous equation estimation between spot volatility and option volume. Moreover, the result of this paper proves that informed investors also prefer futures markets over the spot market. However, there is no change observed in the relationship between option volume and spot volatility due to either call or put options or moneyness.

The possible role of futures volume in the simultaneous equations between spot volatility and option volume has not yet been researched. This paper pioneers in demonstrating that futures volume is an exogenous variable in the simultaneous equation modeling between spot volatility and option volume. Moreover, in the contemporaneous as well as predictive relationships between spot volatility and option volume, futures volume as an exogenous variable is significant in forecasting spot volatility. In addition to this, the current paper uniquely provides evidence of investment in futures also over the spot market by informed investors.

The National Pension Service (NPS) of Korea is one of the largest institutional investors in the world and it has been known as the market stabilizer in the Korean stock market. Nevertheless, it is hard to find the research about the impact of the NPS on the futures market. We investigated the effect of the NPS’s trading KOSPI200 futures on the returns, the liquidity and the volatility of the market using the recent ten years’ transaction data. The main findings are as follows. First, the NPS’s net investment flow (NIF) in the KOSPI200 futures market shows the predictability about the returns of both KOSPI200 futures and KOSPI200 spot index. Second, the NPS’s NIF in the KOSPI200 futures market improves the liquidity of the KOSPI market, where the transactions involved in both the spot market and the futures market occur. Third, the NPS’s NIF in the KOSPI200 futures market reduces the volatility of both the KOSPI200 futures market and the KOSPI market. Unlike the prior studies showing that our futures market tends to increase the volatility of the stock market through the volatility transfer, our finding suggests that the NPS’s trading KOSPI200 futures contributes to decreasing the volatility in both markets. To the best of the authors’ knowledge, this paper is the first study that investigates the impact of the NPS’s trading KOSPI200 futures on the KOSPI200 futures market and the stock market. It shows that the NPS plays a role of the market stabilizer in the futures market. In addition, the NPS’s trading KOSPI200 futures also affects the KOSPI stock market, stabilizing it in terms of both the liquidity and the volatility.

In this study, we explore the empirical relationship between trading volume and volatility among KOSPI200 index stock market, futures and options markets. In particular, in explaining the volatility of each market, the trading in other markets, as well as the trading volume of other markets, also served as explanatory variables. In other words, cross-market effects of trading volume by investor types are analyzed. The empirical results show that there exist the cross-market effects of the relationship between trading volume and volatility in deeply integrated financial markets such as KOSPI200 index stock, futures and options markets. That is, the volatility of one market is explained by the trading volume of trader types in other financial markets. And, overall options trading increases the volatility of each market, while the overall futures trading volume of foreign investors reduce the volatility of each market. Trading volume of Individual investors does not reduce the volatilities of KOSPI200 index and futures markets. That is, trading volume of Individual investors in stock, futures, and options markets increase the volatilities of stock and futures. This implies that foreign investors are informed traders, whereas individual investors are liquidity traders.

Guar Seed crop is ruling the Indian International business mainly due to its application as a drilling fluid in shale energy industry concentrated in the USA. One of the allegations against futures market is its possible role in increasing the volatility of underlying physical market prices. Suspension of guar seed futures contract in 2012 at National Commodity Derivatives Exchange of India (NCDEX)-India, has reignited the controversy and raised an alarm bell to peek into obscure world of Indian commodity derivatives market. Against the backdrop of fiasco in guar futures trading, the purpose of this paper is to investigate whether sudden surge in futures trading volume leads to increase in the volatility of spot market prices.

Guar seed spot returns volatility is modeled as a GARCH (1, 1) process. Futures trading volume and open interest are segregated into expected and unexpected components. The data are analyzed from 2004 to 2011 using Augmented GARCH model to study the contemporaneous relationship between spot volatility and unexpected futures trading activity and Granger Causality test for examining the dynamic relationship between them and ascertaining causality.

Augmented GARCH model reports positive relationship between unexpected futures trading volume (UTV) and spot returns volatility, and, Granger Causality flows from UTV to spot volatility. Therefore, when the level of futures trading volume increases unexpectedly, the volatility of spot prices increases pointing toward the destabilizing impact of futures trading. However, hedger’s activity, represented by open interest is not seen to have any causal/destabilizing impact on spot price volatility of guar seed.

The study provides empirical evidence to support the concern of regulators, genuine hedgers and other traders about the presence of excessive speculation and market manipulations perpetrated through futures market that is disturbing the underlying physical market instead of strengthening it by aiding in price discovery and risk mitigation.

There are very few studies which have empirically investigated the temporal relation between volume and volatility in Indian agricultural commodity markets. With guar seed as a special case the present study investigates statistically the impact of futures trading on spot price volatility. In light of the findings of the study, the curb imposed on guar seed futures trading in 2012 was justified.