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Author: Velmurugan Palaniappan Shanmugam
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
In well-established and matured agricultural commodity futures market, like U.S., the futures markets are expected to serve as a central exchange for both domestic and international information and thus function as a primary mechanism for price discovery and reduce price variability through hedging activities. After having outlined the present status of U.S. agricultural commodities market, a comprehensive study on the volatility spillover between the spot and futures markets of 12 agricultural commodities is carried out to understand the dynamics of volatility factors which hinder the efficiency of those markets, by comparing two different time periods which stand different by various economical and market conditions, for arriving at relative conclusions. The Granger Causality Test results on the direction of flow of volatility between the spot and futures market shows that in majority of the commodities (6 commodities during 1995-2005 & 7 commodities during 2006-2011) there were unidirectional flow of from futures to spot markets, meaning that futures markets has significantly contributed to the volatility of spot market. There were bidirectional relationship in 5 commodities in 1995-2005 & 3 commodities in 2006-2011. This shows that due to information flow from both sides, spot to future markets and future market to spot market, both were equally responsible for causing volatility. Overall there is no evidence of abnormal volatility in the sub-period 2006-2011, compared to1995-2005. Abnormality of non-directional flow is identified in CBOT wheat during 2005-2011 which means that factors beyond futures market were responsible. Whereas, from the GARCH (1, 1) results, in terms of volatility, there is volatility clustering and persistence throughout the study period, with no abnormality during post 2006 period alone. To be specific, we show that volatility in U.S. agricultural commodities markets were prevalent during 1995-2005 and during 2006-2011, which experienced price spikes and price distortions. Hence, we conclude that huge in-flow of funds into the agricultural commodity futures market since 2006 is not the reason for volatility in US agricultural commodity market.
Author: Velmurugan Palaniappan Shanmugam
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
In well-established and matured agricultural commodity futures market, like U.S., the futures markets are expected to serve as a central exchange for both domestic and international information and thus function as a primary mechanism for price discovery and reduce price variability through hedging activities. After having outlined the present status of U.S. agricultural commodities market, a comprehensive study on the volatility spillover between the spot and futures markets of 12 agricultural commodities is carried out to understand the dynamics of volatility factors which hinder the efficiency of those markets, by comparing two different time periods which stand different by various economical and market conditions, for arriving at relative conclusions. The Granger Causality Test results on the direction of flow of volatility between the spot and futures market shows that in majority of the commodities (6 commodities during 1995-2005 & 7 commodities during 2006-2011) there were unidirectional flow of from futures to spot markets, meaning that futures markets has significantly contributed to the volatility of spot market. There were bidirectional relationship in 5 commodities in 1995-2005 & 3 commodities in 2006-2011. This shows that due to information flow from both sides, spot to future markets and future market to spot market, both were equally responsible for causing volatility. Overall there is no evidence of abnormal volatility in the sub-period 2006-2011, compared to1995-2005. Abnormality of non-directional flow is identified in CBOT wheat during 2005-2011 which means that factors beyond futures market were responsible. Whereas, from the GARCH (1, 1) results, in terms of volatility, there is volatility clustering and persistence throughout the study period, with no abnormality during post 2006 period alone. To be specific, we show that volatility in U.S. agricultural commodities markets were prevalent during 1995-2005 and during 2006-2011, which experienced price spikes and price distortions. Hence, we conclude that huge in-flow of funds into the agricultural commodity futures market since 2006 is not the reason for volatility in US agricultural commodity market.
Author: Maosen Zhong
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
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Book Description
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.
Author: Pilar Corredor
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper analyses the role of investor sentiment in the contemporaneous dynamics of spot and futures markets and in volatility spillovers between them. To explore this issue, we analyse spot and futures markets on stock market indexes in different countries: the S&P500 for the US, and a representative set of European indexes (CAC40, DAX30, FTSE100, IBEX35 and EuroStoxx50). Consistent with expectations, we have shown that the correlation is not stable with the level of investor sentiment. More specifically, the correlation between the two markets diminishes significantly during periods of high investor sentiment. Moreover, volatility shocks in either market are also found to have less impact during these periods. These results are compatible with behavioural finance theories suggesting that high investor sentiment leads to an increase in noise trading and a decline in arbitrage activity due to institutional investors' attempts to limit their risk exposure.
Author: Matthias Kalkuhl
Publisher: Springer
ISBN: 3319282018
Category : Business & Economics
Languages : en
Pages : 620
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Book Description
This book provides fresh insights into concepts, methods and new research findings on the causes of excessive food price volatility. It also discusses the implications for food security and policy responses to mitigate excessive volatility. The approaches applied by the contributors range from on-the-ground surveys, to panel econometrics and innovative high-frequency time series analysis as well as computational economics methods. It offers policy analysts and decision-makers guidance on dealing with extreme volatility.
Author: Sotirios Karagiannis
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
This paper investigates the lead-lag relationship in daily returns and volatilities between price movements of FTSE/ASE-20 futures and the underlying FTSE/ASE-20 cash index of the Athens Stock Exchange. The results suggest that there is a bidirectional causality between spot and futures returns, rejecting the usual result of futures leading spot market. However, spot market seems to play a more important role in price discovery. Volatility spillovers across the two markets are examined by using a bivariate EGARCH(1,1) model. This model is found to capture all the volatility dynamics. The results indicate that the transmission of volatility is bidirectional. Any piece of information that is released by the cash market has an effect on futures market volatility, and vice versa. Nevertheless, the volatility spillover from spot to futures market is slightly stronger than in the reverse direction.
Author: Sanjay Sehgal
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
In a period of strong upheavals in India's foreign exchange market, the present study investigates the price discovery and volatility spillovers between spot and futures prices of four major international currencies traded on two trading platforms in India. The price discovery results confirm the long-run equilibrium relationship between spot and futures prices of sample currencies. The volatility spillover results indicate the presence of short and long-run volatility spillovers between futures and spot markets. Volatility spillovers are stronger from futures to spot in the short-run while inverse is the case in the long-run. Based on the results, it can be concluded that in India's foreign exchange market, it is the futures price which assimilates new market information more quickly in its price than spot, while, inverse is found in the long-run. Several policy implications on the role of futures and spot markets are analyzed and discussed.
Author: Chia-Lin Chang
Publisher:
ISBN:
Category :
Languages : en
Pages : 27
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Book Description
Author: Yin-Wong Cheung
Publisher:
ISBN:
Category :
Languages : en
Pages : 17
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Book Description
The pattern of information flows between Eurodollar spot and futures markets is examined using a robust two-step procedure. This procedure allows for conditional mean and variance dynamics as well as conditional heteroskedasticity. We find spot rates affect futures data and vice versa. In addition, there is evidence of volatility spillover between the two markets. Our results also indicate that information conveyed by data on futures tends to have a more persistent impact on both the mean and volatility of cash market price movements than the other way around.
Author: Siu Kei Wong
Publisher:
ISBN:
Category :
Languages : en
Pages : 19
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Book Description
How shocks in one market influence the returns and volatility of other markets has been an important question for portfolio managers. In the finance literature, many studies found evidence of volatility spillovers across international markets, as well as between spot and futures markets. Although real estate is often regarded as a good vehicle for diversification, the dynamics of its volatility transmission have been largely ignored. This paper provides the first study to examine volatility spillovers between the spot and forward (pre-sale) index returns of the Hong Kong real estate market through a bivariate GARCH model. Transaction-based indices were used so that our volatility modelling was free from any smoothing problem. Our results showed that real estate returns exhibited volatility clustering, and the volatility of the forward market was more sensitive to shocks than the spot market. Moreover, volatility was mainly transmitted from the forward market to the spot market, but not vice versa.
Author: Victor K. Ng
Publisher:
ISBN:
Category : Futures market
Languages : en
Pages : 26
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Book Description
