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Time-varying volatility in Canadian and U.S. stock index and index futures markets: A multivariate analysis

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  • Lucy F. Ackert
  • Marie D. Racine

Abstract

We use a multivariate generalized autoregressive heteroskedasticity model (M-GARCH) to examine three stock indexes and their associated futures prices: the New York Stock Exchange Composite, Standard and Poor's 500, and Toronto 35. The North American context is significant because markets in Canada and the United States share similar structures and regulatory environments. Our model allows examination of dependence in volatility as it captures time variation in volatility and cross-market influences. Estimated time-variation in volatility is significant, and the volatilities are highly positively correlated. Yet, we find that the correlation in North American index and futures markets has declined over time.

Suggested Citation

  • Lucy F. Ackert & Marie D. Racine, 1998. "Time-varying volatility in Canadian and U.S. stock index and index futures markets: A multivariate analysis," FRB Atlanta Working Paper 98-14, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:98-14
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    Cited by:

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    2. Constantinos Katrakilidis & Athanasios Koulakiotis, 2006. "The Impact of Stock Exchange Rules on Volatility and Error Transmission -- The Case of Frankfurt and Zurich Cross-Listed Equities," Annals of Economics and Finance, Society for AEF, vol. 7(2), pages 321-338, November.
    3. Tao, Juan & Green, Christopher J., 2012. "Asymmetries, causality and correlation between FTSE100 spot and futures: A DCC-TGARCH-M analysis," International Review of Financial Analysis, Elsevier, vol. 24(C), pages 26-37.

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    Financial markets; Futures; Stock market;
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