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Article: Futures trading activity and stock price volatility: Some extensions

TitleFutures trading activity and stock price volatility: Some extensions
Authors
Issue Date2003
PublisherRoutledge. The Journal's web site is located at http://www.tandf.co.uk/journals/routledge/09603107.html
Citation
Applied Financial Economics, 2003, v. 13 n. 9, p. 655-664 How to Cite?
AbstractAn earlier investigation by Bessembinder and Seguin employed open interest data to demonstrate that heavy (unexpected) trading activity in stock index futures is destabilizing. This article re-examines the issue in the framework of the commitments of four groups of traders in the S&P 500 index futures market: hedgers (institutional traders), large speculators, small traders and spreaders. Finding that surges in institutional commitments in index futures are followed by increased levels of price variability. The results are not conclusive on whether portfolio insurance strategies contribute to this relationship. Moreover, there is no evidence that the participation of other futures traders, notably large speculators and small traders, is destabilizing. An implication is that the current margins structure that favours institutional traders is ill-suited to the goal of volatility-control. The release of the commitment of trader data which provides open interest information on an ex post basis is found to have no impact on stock market volatility. Thus, the positive relationship between surges in institutional futures activity and volatility seems to stem from trading mechanisms, rather than from the formal disclosure of commitment of traders.
Persistent Identifierhttp://hdl.handle.net/10722/177709
ISSN
2015 SCImago Journal Rankings: 0.244
References

 

DC FieldValueLanguage
dc.contributor.authorChatrath, Aen_US
dc.contributor.authorSong, Fen_US
dc.contributor.authorAdrangi, Ben_US
dc.date.accessioned2012-12-19T09:39:38Z-
dc.date.available2012-12-19T09:39:38Z-
dc.date.issued2003en_US
dc.identifier.citationApplied Financial Economics, 2003, v. 13 n. 9, p. 655-664en_US
dc.identifier.issn0960-3107en_US
dc.identifier.urihttp://hdl.handle.net/10722/177709-
dc.description.abstractAn earlier investigation by Bessembinder and Seguin employed open interest data to demonstrate that heavy (unexpected) trading activity in stock index futures is destabilizing. This article re-examines the issue in the framework of the commitments of four groups of traders in the S&P 500 index futures market: hedgers (institutional traders), large speculators, small traders and spreaders. Finding that surges in institutional commitments in index futures are followed by increased levels of price variability. The results are not conclusive on whether portfolio insurance strategies contribute to this relationship. Moreover, there is no evidence that the participation of other futures traders, notably large speculators and small traders, is destabilizing. An implication is that the current margins structure that favours institutional traders is ill-suited to the goal of volatility-control. The release of the commitment of trader data which provides open interest information on an ex post basis is found to have no impact on stock market volatility. Thus, the positive relationship between surges in institutional futures activity and volatility seems to stem from trading mechanisms, rather than from the formal disclosure of commitment of traders.en_US
dc.languageengen_US
dc.publisherRoutledge. The Journal's web site is located at http://www.tandf.co.uk/journals/routledge/09603107.htmlen_US
dc.relation.ispartofApplied Financial Economicsen_US
dc.titleFutures trading activity and stock price volatility: Some extensionsen_US
dc.typeArticleen_US
dc.identifier.emailSong, F: fmsong@hkucc.hku.hken_US
dc.identifier.authoritySong, F=rp01095en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1080/09603100110115183en_US
dc.identifier.scopuseid_2-s2.0-0041470183en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0041470183&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume13en_US
dc.identifier.issue9en_US
dc.identifier.spage655en_US
dc.identifier.epage664en_US
dc.publisher.placeUnited Kingdomen_US
dc.identifier.scopusauthoridChatrath, A=6701310668en_US
dc.identifier.scopusauthoridSong, F=7203075605en_US
dc.identifier.scopusauthoridAdrangi, B=6603619576en_US

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