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The effect of derivatives trading on volatility of the underlying asset: evidence from the Greek stock market

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  • Evangelos Drimbetas
  • Nikolaos Sariannidis
  • Nicos Porfiris
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    Abstract

    In this article, the effects of the introduction of the futures and options into the FTSE/ASE 20 index on the volatility of the underlying index are studied. This particular issue is quite controversial since contradictory results have been found in various markets. Analysing the data (August 1997-April 2005) with the help of an EGARCH model it is shown that the introduction of derivatives has induced a reduction of the conditional volatility of the FTSE/ASE20 index and consequently it has increased its efficiency.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100500461702
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    Bibliographic Info

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

    Volume (Year): 17 (2007)
    Issue (Month): 2 ()
    Pages: 139-148

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    Handle: RePEc:taf:apfiec:v:17:y:2007:i:2:p:139-148

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

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    References

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    Cited by:
    1. 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.
    2. Esqueda, Omar A. & Assefa, Tibebe A. & Mollick, André Varella, 2012. "Financial globalization and stock market risk," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 87-102.
    3. Arif Oduncu, 2011. "The Effects of Currency Futures Trading on Turkish Currency Market," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 5(1), pages 97-109.
    4. George Karathanassis & Vasilios Sogiakas, 2010. "Spill over effects of futures contracts initiation on the cash market: a regime shift approach," Review of Quantitative Finance and Accounting, Springer, vol. 34(1), pages 95-143, January.
    5. P., Srinivasan & M., Kalaivani, 2013. "Day-of-the-Week Effects in the Indian stock market," MPRA Paper 46805, University Library of Munich, Germany.
    6. Lake E. A. & Katrakilidis C., 2009. "The Effects of the Increasing Oil Price Returns and its Volatility on Four Emerged Stock Markets," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 149-161.
    7. Hai-Chuan Xu & Wei Zhang & Xiong Xiong & Wei-Xing Zhou, 2014. "An agent-based computational model for China's stock market and stock index futures market," Papers 1404.1052, arXiv.org.
    8. Shaen Corbet & Cian Twomey, 2014. "Have Exchange Traded Funds Influenced Commodity Market Volatility?," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 323-335.

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