Intertemporal volatility and price interactions between Australian and Japanese spot and futures stock index markets

✍ Scribed by Sim, Ah-Boon; Zurbreugg, Ralf

• Publisher: John Wiley and Sons
• Year: 1999
• Tongue: English
• Weight: 262 KB
• Volume: 19
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/(sici)1096-9934(199908)19:5<523::aid-fut2>3.0.co;2-6

✦ Synopsis

Previous studies have examined causality within and between different spot and futures markets with a motivation to discover market comovements, price leadership effects, and, more recently, volatility spillovers across markets. However, the empirical framework within which this is accomplished tends not to analyze explicitly foreign spillover effects upon a spot-futures relationship, which may significantly alter the equilibrium between these markets. This will then have a direct impact upon the estimation of dynamic risk adjustments that occur from the interaction between these markets. This article develops a quadvariate simultaneous-equation EC-ARCH model with an emphasis on volatility spillovers as a better alternative methodology to evaluate these relationships from a different perspective. This model is applied to examine the interaction between the Australian The authors wish to thank two anonymous referees, Andrew Jeffery, and Paul Kofman.