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Intraday price dynamics in spot and derivatives markets

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  • Kim, Jun Sik
  • Ryu, Doojin
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    Abstract

    This study examines intraday relationships among the spot index, index futures, and the implied volatility index based on the VAR(1)-asymmetric BEKK-MGARCH model. Analysis of a high-frequency dataset from the Korean financial market confirms that there is a strong intraday market linkage between the spot index, KOSPI200 futures, and VKOSPI and that asymmetric volatility behaviour is clearly present in the Korean market. The empirical results indicate that the futures return shock affects the spot market more severely than the spot return shock affects the futures market, though there is a bi-directional causal relationship between the spot and futures markets. Our results, based on a high-quality intraday dataset, satisfy both the positive risk–return relationship and asymmetric volatility effect, which are not reconciled in the frameworks of previous studies.

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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 394 (2014)
    Issue (Month): C ()
    Pages: 247-253

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    Handle: RePEc:eee:phsmap:v:394:y:2014:i:c:p:247-253

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: BEKK GARCH; Asymmetric volatility; Intraday analysis; KOSPI200; KOSPI200 futures; VKOSPI;

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    References

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    Cited by:
    1. Kang, Bo Soo & Ryu, Doojin & Ryu, Doowon, 2014. "Phase-shifting behaviour revisited: An alternative measure," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 401(C), pages 167-173.

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