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Stock Volatility and the Levels of the Basis and Open Interest in Future Contracts

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Author Info
 Chen, Nai-Fu
Cuny, Charles J
Haugen, Robert A
Abstract

This article tests a theoretical model of the basis and open interest of stock index futures. The model is based on the differences between stock and futures in terms of investors' ability to customize stock portfolios and liquidity. Empirical evidence confirms the model's prediction that increased volatility decreases the basis and increases open interest. Copyright 1995 by American Finance Association.

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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 50 (1995)
Issue (Month): 1 (March)
Pages: 281-300
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Handle: RePEc:bla:jfinan:v:50:y:1995:i:1:p:281-300

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  1. Jian Yang & David A. Bessler & Hung-Gay Fung, 2004. "The informational role of open interest in futures markets," Applied Economics Letters, Taylor and Francis Journals, vol. 11(9), pages 569-573, January. [Downloadable!] (restricted)
  2. Berglund, T. & Kabir, R., 1995. "What explains the difference between the futures' price and its "fair" value? : evidence from the european options exchange," Discussion Paper 83, Tilburg University, Center for Economic Research. [Downloadable!]
  3. Rafiqul Bhuyan, 2002. "Information, Alternative Markets, and Security Price Processes: A Survey of Literature," Finance 0211002, EconWPA. [Downloadable!]
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This page was last updated on 2008-11-26.

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