An empirical examination of the relation between futures spreads volatility, volume, and open interest
✍ Scribed by Paul Berhanu Girma; Mbodja Mougoué
- Publisher
- John Wiley and Sons
- Year
- 2002
- Tongue
- English
- Weight
- 128 KB
- Volume
- 22
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
Abstract
This study investigates the relation between petroleum futures spread variability, trading volume, and open
interest in an attempt to uncover the source(s) of variability in futures spreads. The study finds
that contemporaneous (lagged) volume and open interest provide significant explanation for futures
spreads volatility when entered separately. The study also shows that lagged volume and lagged open interest,
when entered in the conditional variance equation simultaneously, have greater effect on volatility and
substantially reduce the persistence of volatility. This finding seems to support the sequential information
arrival hypothesis of Copeland (1976). Finally, the findings of this study also suggest a degree of
market inefficiency in petroleum futures spreads. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark
22:1083–1102, 2002