✦ LIBER ✦

The effect of futures trading on the stability of standard and poor 500 returns

✍ Scribed by Avraham Kamara; Thomas W. Miller Jr.; Andrew F. Siegel

Publisher: John Wiley and Sons
Year: 1992
Tongue: English
Weight: 848 KB
Volume: 12
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.3990120605

No coin nor oath required. For personal study only.

✦ Synopsis

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 social welfare if these new speculators are less informed than traders already in the market [Stein (1987)) Futures trading can increase cash price volatility if increased liquidity causes cash prices to reflect new information more quickly. In this case, the increase in cash price volatility should increase net social welfare.

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