𝔖 Bobbio Scriptorium
✦   LIBER   ✦

Revisiting the empirical estimation of the effect of margin changes on futures trading volume

✍ Scribed by Hans R. Dutt; Ira L. Wein

Publisher
John Wiley and Sons
Year
2003
Tongue
English
Weight
112 KB
Volume
23
Category
Article
ISSN
0270-7314

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

This study revisits the empirical estimation of the effect of margin requirements on trading volume. Although
theory suggests that margin requirements impose a cost to traders and will therefore likely reduce volume traded,
empirical examinations have generally failed to find this association. The contention of this article is that the
theory is correct, but empirical estimation has generally neglected to adjust margins for underlying price risk.
After adjusting for risk, this analysis finds economically and statistically significant negative effects of
margin requirements on trading volume as predicted by theory. This study examined 6 contracts over a
17‐year time period and found that financial futures contracts (gold, Dow Jones, and 10‐Year
Treasury Notes) were considerably more sensitive to changes in margin requirements than agricultural futures
(wheat, corn, and oats). Β© 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:561–576, 2003

πŸ“œ SIMILAR VOLUMES

The effects of margins on trading in fut
The effects of margins on trading in futures markets
✍ Raymond P. H. Fishe; Lawrence G. Goldberg πŸ“‚ Article πŸ“… 1986 πŸ› John Wiley and Sons 🌐 English βš– 673 KB

ndividuals trading in futures markets are required to post security deposits, I called margins, to insure that brokers and exchanges are potected from nonperformance due to unfavorable price movements. Specified in dollar amounts per contract, margins may be posted in either cash or interest-bearing

The effect of futures trading on the pri
The effect of futures trading on the price volatility of gnma securities
✍ W. Gary Simpson; Timothy C. Ireland πŸ“‚ Article πŸ“… 1982 πŸ› John Wiley and Sons 🌐 English βš– 548 KB

ne of the timeless concerns associated with futures trading is the possibility 0 that destabilizing speculation in futures markets will be transmitted to the cash markets causing distortions in the prices of the underlying commodities. With the tremendous growth of the market for futures contracts o

The effect of futures trading on the sta
The effect of futures trading on the stability of standard and poor 500 returns
✍ Avraham Kamara; Thomas W. Miller Jr.; Andrew F. Siegel πŸ“‚ Article πŸ“… 1992 πŸ› John Wiley and Sons 🌐 English βš– 848 KB

and the referees for helpful comments. 'Financial futures trading reduces the cost of entry of small traders into the financial markets [Kamara (1988)l. Introducing new speculators into the markets improves risk sharing and increases liquidity, but can make cash prices more noisy and reduce net soci

Evidence on the effect of information an
Evidence on the effect of information and noise trading on intraday gold futures returns
✍ Beni Lauterbach; Margaret Monroe πŸ“‚ Article πŸ“… 1989 πŸ› John Wiley and Sons 🌐 English βš– 468 KB

everal studies such as and document that S equity returns are more volatile during trading hours than during non-trading hours. In a recent paper, examine the behavior of the daily (close to close) returns of all NYSE and AMEX stocks. They find that trading hour return variance is much higher th

The effect of spot and futures trading o
The effect of spot and futures trading on stock index market volatility: A nonparametric approach
✍ M. Illueca; J. A. Lafuente πŸ“‚ Article πŸ“… 2003 πŸ› John Wiley and Sons 🌐 English βš– 289 KB πŸ‘ 1 views

## Abstract This article provides empirical evidence on the intraday relation between spot volatility and trading volume in the Spanish stock index futures market. GARCH methodology is used to estimate spot volatility. We analyze the potential relation between spot and futures trading volume and sp