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The impact of stock index futures on the Korean stock market

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  • Hyun-Jung Ryoo
  • Graham Smith
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    Abstract

    This article investigates the impact on the spot market of trading in KOSPI 200 futures. Empirical results show that futures trading increases the speed at which information is impounded into spot market prices, reduces the persistence of information and increases spot market volatility. The spot and futures prices are cointegrated and there is bidirectional causality between the two markets. The lead-lag relation is asymmetric with weaker evidence that the spot index leads futures and stronger evidence that the stock index futures market leads the spot market.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/0960310042000201183
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 14 (2004)
    Issue (Month): 4 ()
    Pages: 243-251

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    Handle: RePEc:taf:apfiec:v:14:y:2004:i:4:p:243-251

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    Web page: http://www.tandfonline.com/RAFE20

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    Cited by:
    1. Thomas Dimpfl & Robert Jung, 2011. "Financial market spillovers around the globe," Global Financial Markets Working Paper Series 20-2011, Friedrich-Schiller-University Jena.
    2. Thomas Dimpfl & Robert C. Jung, 2012. "Financial market spillovers around the globe," Applied Financial Economics, Taylor & Francis Journals, vol. 22(1), pages 45-57, January.
    3. Kasman, Adnan & Kasman, Saadet, 2008. "The impact of futures trading on volatility of the underlying asset in the Turkish stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(12), pages 2837-2845.
    4. Nikolaos Sariannidis & Evangelos Drimbetas, 2008. "Impact of international volatility and the introduction of Individual Stock Futures on the volatility of a small market," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 119-.
    5. Evangelos Drimbetas & Nikolaos Sariannidis & Nicos Porfiris, 2007. "The effect of derivatives trading on volatility of the underlying asset: evidence from the Greek stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 17(2), pages 139-148.

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