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Growing pains: The evolution of new stock index futures in emerging markets

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  • Sila Alan, Nazli
  • Karagozoglu, Ahmet K.
  • Korkmaz, Sibel

Abstract

Analyzing the first seven years of trading in Turkish stock index futures (BIST 30) and contrasting that to the progress of Korean (KOSPI 200) and Taiwanese (TAIEX) markets, we find that BIST 30 initially experiences a persistent mispricing and speculative trading similar to KOSPI 200 but it also experiences the largest increase in hedge effectiveness, becoming hedger-dominated similar to TAIEX. Most significantly, we demonstrate that spot market short-sell quote volume is a good measure of short-sale constraints and a significant determinant of mispricing in BIST 30. A methodological contribution of this paper is a four-equation multivariate VAR framework to analyze the volatility impact of futures.

Suggested Citation

  • Sila Alan, Nazli & Karagozoglu, Ahmet K. & Korkmaz, Sibel, 2016. "Growing pains: The evolution of new stock index futures in emerging markets," Research in International Business and Finance, Elsevier, vol. 37(C), pages 1-16.
    • Handle: RePEc:eee:riibaf:v:37:y:2016:i:c:p:1-16
    DOI: 10.1016/j.ribaf.2015.10.004
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    Cited by:

    1. Jieye Qin & Christopher J. Green & Kavita Sirichand, 2019. "Determinants of Nikkei futures mispricing in international markets: Dividend clustering, currency risk, and transaction costs," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(10), pages 1269-1300, October.
    2. Pham, Son Duy & Nguyen, Thao Thac Thanh & Do, Hung Xuan, 2022. "Effect of futures trading on the liquidity of underlying stocks: Evidence from Vietnam," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).

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    More about this item

    Keywords

    Index futures; Mispricing; Price discovery; Volatility; Hedging effectiveness;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G19 - Financial Economics - - General Financial Markets - - - Other

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