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Investigating Causality Effects in Return Volatility among Five Major Futures Markets in European Countries with a Mediterranean Connection

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  • Ercan Özen
  • Özdemir Letife
  • Simon Grima
  • Frank Bezzina

Abstract

This study analyses daily data of the stock index futures markets of Turkey (BIST30) and four Eurozone countries - Italy (MIB30), France (CAC40), Spain (IBEX), Greece (ASE20) - spanning from March 2005to March 2012. Using the GARCH model and Granger methodology, the study shows that bidirectional causality holds for futures return volatilities in these Eurozone areas, and it is only in the case of the Turkish BIST30 index futures returns that a weak unidirectional pattern can be identified. This provides empirical evidence that the Eurozone stock markets investigated in this study are highly integrated. Additionally, the spillover effect between the Turkish market and the other Eurozone stock markets in the Mediterranean isinsignificant. These findings provide a better understanding of the inter-relations and volatility causality among these five financial markets and could better guide financial policy makers and investors in their efforts to maintain/regain stability in their financial system.

Suggested Citation

  • Ercan Özen & Özdemir Letife & Simon Grima & Frank Bezzina, 2014. "Investigating Causality Effects in Return Volatility among Five Major Futures Markets in European Countries with a Mediterranean Connection," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 2, pages 207-220, December.
    • Handle: RePEc:mul:jdp901:doi:10.12831/78759:y:2014:i:2:p:207-220
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    4. S. Purwanto & M. Setiawan & F. Rohman & N.K. Indrawati, 2018. "Financial Assistance, Marketing Assistance and Export Commitment to Improve Export Performance," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 69-91.

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    More about this item

    Keywords

    Futures Markets; Return Volatility (GARCH); Granger Causality; Mediterranean; Stability. JEL Codes: G15; G13; F36; C32; G11;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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