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Index futures and options and stock market volatility

โœ Scribed by Pericli, Andreas; Koutmos, Gregory

Publisher
John Wiley and Sons
Year
1997
Tongue
English
Weight
266 KB
Volume
17
Category
Article
ISSN
0270-7314

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โœฆ Synopsis

This article has benefited from the comments and suggestions of two anonymous reviewers.

1

Of course, speculation based on fundamentals is likely to be stabilizing rather than destabilizing. Destabilizing speculation may be the result of noise trading (i.e., buying and selling not on the basis of fundamentals). Feedback trading strategies also have the effect of increasing market volatility.

2

The huge losses of Procter and Gamble, Orange County Metallgesellschaft, and Barrings, in deals involving derivatives, have created a great deal of controversy [e.g., Miller (1995) and Kuprianov (1995)].

s Andreas Pericli is a Senior Economist with the Federal Home Loan Mortgage Corporation.

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