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New Evidence On Expiration-Day Effects Using Realized Volatility: An Intraday Analysis For The Spanish Stock Exchange

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Author Info
Juan A. Lafuente () (Universitat Jaume I)
Manuel Illueca Muñoz (Universitat Jaume I)

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Abstract

In this paper we provide additional evidence on expiration effects in the Ibex 35 stock index futures market using realized volatility as proposed in Andersen et al. (2003, Econometrica 71, 529-626). Our findings reveal not only a significant increase in spot trading activity, but also the existence of a significant jump in spot volatility at index futures expiration. Moreover, we analyze the importance of the data frequency considered, revealing that the use of GARCH methodology from daily data does not have the ability to statistically assess such expiration-day effect. Additional empirical evidence is provided for the S&P 500 stock index futures market. Neither unconditional nor conditional realized volatility has a significant increase at expiration for the US market, suggesting that this effect is specific for the Spanish market, at least for the period analyzed. Este artículo proporciona nueva evidencia empírica sobre el efecto del vencimiento de los contratos de futuros sobre el índice IBEX 35, utilizando la medida de volatilidad realizada propuesta en Andersen et al. (2003, Econometrica 71, 529-626). Nuestros resultados ponen de manifiesto que al vencimiento de los contratos de futuros se produce no sólo un incremento en el volumen negociado en el mercado de contado, sino también un incremento significativo de la volatilidad del activo subyacente. Además, el trabajo pone de manifiesto la importancia de contar con información intradía para llevar a cabo el análisis empírico. De hecho, el uso de la metodología GARCH a partir de datos diarios no permite apreciar las anomalías que se producen en el mercado de contado cuando vencen los contratos de futuros. También se proporciona evidencia empírica relativa al mercado de futuros sobre el índice S&P 500. En este caso, ni la volatilidad condicionada ni la volatilidad no condicionada aumentan significativamente en los días de vencimiento de los contratos de futuros, sugiriendo que la evidencia reportada en este trabajo constituye una característica específica del mercado español, al menos durante el periodo analizado.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 2006-05.

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Length: 23 pages
Date of creation: Feb 2006
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:2006-05

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Related research
Keywords: Mercados de futuros; Volatilidad realizada; Desestabilización del mercado de contado Futures Markets; Realized volatility; spot market destabilization;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G19 - Financial Economics - - General Financial Markets - - - Other
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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  3. Arago, Vicent & Fernandez, A, 2002. "Expiration and Maturity Effect: Empirical Evidence from the Spanish Spot and Futures Stock Index," Applied Economics, Taylor and Francis Journals, vol. 34(13), pages 1617-26, September. [Downloadable!] (restricted)
  4. Stoll, Hans R & Whaley, Robert E, 1990. "Program Trading and Individual Stock Returns: Ingredients of the Triple-Witching Brew," Journal of Business, University of Chicago Press, vol. 63(1), pages S165-92, January. [Downloadable!] (restricted)
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  6. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Tim Bollerslev & Jeffrey Wooldridge, 1992. "Quasi-maximum likelihood estimation and inference in dynamic models with time-varying covariances," Econometric Reviews, Taylor and Francis Journals, vol. 11(2), pages 143-172. [Downloadable!] (restricted)
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    Other versions:
  9. Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Copeland, Thomas E, 1976. "A Model of Asset Trading under the Assumption of Sequential Information Arrival," Journal of Finance, American Finance Association, vol. 31(4), pages 1149-68, September. [Downloadable!] (restricted)
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  12. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Heiko Ebens, 2000. "The Distribution of Stock Return Volatility," NBER Working Papers 7933, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 1(1), pages 3-40. [Downloadable!] (restricted)
  14. Andersen, Torben G, 1996. " Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance, American Finance Association, vol. 51(1), pages 169-204, March. [Downloadable!] (restricted)
  15. Rahman, Shafiqur & Lee, Cheng-few & Ang, Kian Ping, 2002. " Intraday Return Volatility Process: Evidence from NASDAQ Stocks," Review of Quantitative Finance and Accounting, Springer, vol. 19(2), pages 155-80, September. [Downloadable!] (restricted)
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  1. repec:mop:credwp:09.05.84 is not listed on IDEAS
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  2. Julien Chevallier & Benoît Sévi, 2009. "On the realized volatility of the ECX CO2 emissions 2008 futures contract: distribution, dynamics and forecasting," Working Papers halshs-00387286_v1, HAL. [Downloadable!]
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