scholarly journals The price and volume effect of initial single stock futures trading

2009 ◽  
Vol 7 (2) ◽  
pp. 367-386
Author(s):  
Johan de Beer
Keyword(s):  
South African ◽  
Spot Market ◽  
Volume Effect ◽  
Futures Contracts ◽  
Futures Trading ◽  
General Increase ◽  
Volume Comparison ◽  
Share Prices ◽  
Trading Volumes ◽  
Single Stock Futures

The introduction of single stock futures to a market allows for a per company impact-assessment of futures trading activity. Thirty-eight South African companies were evaluated in terms of a possible price and volume effect due to the initial trading of their respective single stock futures contracts. An event study revealed that SSF trading had little impact on the underlying share prices while a normalised volume comparison pre to post SSF trading showed a general increase in spot market trading volumes.

scholarly journals The Price and Volume Effect of Single-Stock Futures Trading on the Pakistani stock market

2014 ◽  
Vol 2 (2) ◽  
pp. 1-32 ◽  
Author(s):  
Adil Awan ◽  
Syed M. Amir Shah
Keyword(s):  
Trading Volume ◽  
Abnormal Returns ◽  
Volume Effect ◽  
Futures Contracts ◽  
Futures Trading ◽  
Index Futures ◽  
Dummy Variable ◽  
Trading Volumes ◽  
One Year ◽  
Single Stock Futures

The advent of single-stock futures (SSFs) provides an opportunity to investigate the company-wide impact of futures trading rather than the market-wide response captured through index futures contracts. This study analyzes the price and volume effect of SSFs on the underlying spot market based on a sample of 26 Pakistani firms. The dataset used includes one-year pre- and post-event data on closing prices and trading volumes. We conduct an event study in which the abnormal returns of individual companies and average abnormal returns reveal that futures trading has very little impact on the underlying spot returns. The cumulative abnormal returns show that statistically significant positive abnormal returns are experienced after SSF trading but with negative returns in the pre-event period. We compare pre- and post-event average normalized volumes using the t-test and dummy variable regression; the trend coefficients show a general decrease in trading volume. Consequently, there is an increase in returns and decrease in trading volume post-SSF trading in the Pakistani market.

scholarly journals Changes in the volatility level and structure of shares post single stock futures trading

2009 ◽  
Vol 7 (2) ◽  
pp. 279-295 ◽  
Author(s):  
Johan de Beer
Keyword(s):  
South African ◽  
Spot Market ◽  
Market Volatility ◽  
Futures Studies ◽  
Futures Trading ◽  
Index Futures ◽  
Structure Pattern ◽  
Single Stock Futures

The introduction of single stock futures to a market presents the opportunity to assess an individual company’s response to futures trading directly, in contrast to the market-wide impact obtained from index futures studies. The listed shares of thirty-eight South African companies were evaluated in terms of a possible volatility effect due to the initial trading of their respective single stock futures contacts. A GARCH(1,1) model established a volatility structure (pattern of behaviour) per company. Results, in general, showed a reduction in the level and changes in the structure of spot market volatility post single stock futures.

scholarly journals The Volatility Effect of Single-Stock Futures Trading on the Pakistani Stock Market

2013 ◽  
Vol 2 (1) ◽  
pp. 65-93
Author(s):  
Adil Awan ◽  
Amir Rafique
Keyword(s):  
Stock Market ◽  
Stock Exchange ◽  
Spot Market ◽  
Market Volatility ◽  
Time Varying ◽  
Futures Trading ◽  
F Test ◽  
Single Stock Futures ◽  
The Impact ◽  
Econometric Technique

The impact of single-stock futures on spot market volatility is still debated in the finance literature. The aim of this study is to analyze the effect of the introduction of single-stock futures on the volatility of the Karachi Stock Exchange (KSE). We examine changes in the level of volatility and structure after the introduction of single-stock futures, evaluating 24 companies listed on the KSE. The study applies the F-test to determine differences in variance as a traditional measure for volatility and uses GARCH (1,1) as an econometric technique for detecting time-varying volatility. The results show that there is no effect on the volatility level but that changes occur in the structure of volatility after stock futures trading.

scholarly journals Single Stock Futures Trading and Stock Price Volatility: Empirical Analysis

2009 ◽  
Vol 48 (4II) ◽  
pp. 553-563 ◽  
Author(s):  
Safi Ullah Khan ◽  
Syed Tahir Hijzi
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Price Volatility ◽  
Futures Contracts ◽  
Sufficient Evidence ◽  
Spot Price ◽  
Return Volatility ◽  
Futures Trading ◽  
Underlying Stocks ◽  
Single Stock Futures

This study examines impact of the introduction of single stock futures contracts on the return volatility of the SSFs-listed underlying stocks. The study documents a significant decrease in return volatility for the SSFs-underlying stocks following the introduction of single stock futures contracts on the Karachi Stock Exchange. The multivariate analysis in which the spot trading volume, the futures trading volume and open interest were partitioned into news and informationless components, the estimated coefficient of expected futures volume component is statistically significant and negatively related to volatility, suggesting that equity volatility is mitigated when the expected level of futures activity is high. The findings of the decreased spot price volatility of the SSFs-underlying stocks associated with large expected futures activity is important to the debate of regarding the role of equity derivatives trading in stock market volatility. These empirical results for the Pakistan’s equity market support theories implying that equity derivates trading improves liquidity provision and depth in the equity markets, and appear to be in contrast to the theories implying that equity derivates markets provide a medium for destabilising speculation. Finally, the SSFs-listed stocks were grouped with a sample of non-SSFs stocks to examine cross-sectional data for comparing changes in return volatility. After controlling for the effects of a number of determinants of volatility, sufficient evidence is found to support that, this multivariate test, like the previous analysis, provides no evidence that the volatility of the SSFsunderlying stocks is positively related to the introduction of the single stock futures trading in the Pakistan’s stock market.

scholarly journals Seasonal patterns in the South African share index futures market

1994 ◽  
Vol 25 (4) ◽  
pp. 155-161 ◽  
Author(s):  
G. Watson ◽  
E. V.D.M. Smit
Keyword(s):  
South African ◽  
Spot Market ◽  
Futures Market ◽  
Futures Contracts ◽  
Seasonal Patterns ◽  
The South ◽  
Index Futures ◽  
Near Future ◽  
Daily Returns

In this article three near futures contracts are examined, namely the All Share Near Future, the All Industrial Near Future and the All Gold Near Future, to determine whether daily futures returns exhibit well-documented seasonal patterns. The detection of seasonal patterns in the daily returns for the three underlying indices, namely the All Share Index, the All Industrial Index and the All Gold Index, is also included. Results are compared to the findings of Hattingh Smit. It is shown that seasonal similarities exist between the futures market and the spot market. Seasonal phenomena in the underlying indices further tend to remain stable over the different sample periods considered.

scholarly journals Derivative trading and structural breaks in volatility in India: an ICSS approach

2020 ◽  
Vol 17 (2) ◽  
pp. 334-352
Author(s):  
Guntur Anjana Raju ◽  
Sanjeeta Shirodkar
Keyword(s):  
Time Series ◽  
Structural Breaks ◽  
Detrimental Effect ◽  
Futures Contracts ◽  
Garch Models ◽  
Specific Response ◽  
Futures Trading ◽  
Underlying Stocks ◽  
Single Stock Futures ◽  
Upward Biases

Researchers argue that ignoring the structural breaks in the time-series variance can cause significant upward biases in the degree of persistence in estimated GARCH models. Against this backdrop, the present study empirically examines the effect of stock futures on the underlying stock’s volatility in India by incorporating the structural breaks with the help of ICSS test and AR (1)-GARCH (1, 1) model for 30 most liquid and actively traded underlying stocks and their associated futures contracts. The study period ranges from the 1st January 2000 or the listing date of the particular stock (whichever is prior) till 31st March 2019. The study contributes to the on-going debate regarding the effect of derivatives on the underlying stock market’s volatility in two ways. Firstly, by taking into consideration the breaks in the volatility and, secondly, studying the effect of single stock futures will allow us to evaluate company-specific response to futures trading directly. The study offers a mixed outcome for the stocks under consideration. However, there is evidence of a decline in unconditional volatility for the majority of the stocks. The overall findings indicate that trading in stock futures may not have any detrimental effect on the underlying stock’s volatility.

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