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Informational efficiency and spurious spillover effects between spot and derivatives markets

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  • Sogiakas, Vasilios
  • Karathanassis, George

Abstract

Derivatives markets produce the means for price discovery as leading indicators in the transmission of new information. Examining volatility spillovers between spot and derivatives markets without accounting for possible disequilibria in the long term relationship could potentially result in spurious spillover effects. Our paper aims to contribute in this literature by controlling for possible disturbances in the long-run equilibrium relationship between the two markets. By application of a regime shift approach we provide evidence of a time varying spillover effect from derivatives to spot markets. However, this effect is inconclusive in the absence of a significant (1 −1) cointegration relationship.

Suggested Citation

  • Sogiakas, Vasilios & Karathanassis, George, 2015. "Informational efficiency and spurious spillover effects between spot and derivatives markets," Global Finance Journal, Elsevier, vol. 27(C), pages 46-72.
    • Handle: RePEc:eee:glofin:v:27:y:2015:i:c:p:46-72
    DOI: 10.1016/j.gfj.2015.04.004
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    Cited by:

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    2. I-Chun Tsai & Shu-Hen Chiang, 2018. "Risk Transfer among Housing Markets in Major Cities in China," Sustainability, MDPI, vol. 10(7), pages 1-20, July.
    3. Tingting Cao & Weiqing Sun & Cuiping Sun & Lin Hao, 2022. "Unique futures in China: studys on volatility spillover effects of ferrous metal futures," Papers 2206.15039, arXiv.org.
    4. Shailesh Rastogi & Chaitaly Athaley, 2019. "Volatility Integration in Spot, Futures and Options Markets: A Regulatory Perspective," JRFM, MDPI, vol. 12(2), pages 1-15, June.
    5. Saker Sabkha & Christian Peretti & Dorra Hmaied, 2019. "On the informational market efficiency of the worldwide sovereign credit default swaps," Journal of Asset Management, Palgrave Macmillan, vol. 20(7), pages 581-608, December.
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    More about this item

    Keywords

    Spurious spillover effects; Derivatives markets; Regime shift;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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