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Volatility Impact of Stock Index Futures Trading - A Revised Analysis

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  • Eva Matanovic
  • Helmut Wagner

Abstract

The recent financial crisis renewed concerns about a possible destabilizing impact of derivatives trading. Despite a very active research, the question whether or not derivatives tend to destabilize financial markets has not yet been answered to satisfaction. This contribution aims to revise the robustness of recent empirical findings and to remedy some methodological shortcomings of earlier studies. Acknowledging their practical relevance, we focus on futures and examine the volatility impact of DAX futures trading. Our results confirm a volatility-reducing impact of DAX futures trading, whereas the observed deterioration of the fundamental price building process proved to be statistically insignificant.

Suggested Citation

  • Eva Matanovic & Helmut Wagner, 2012. "Volatility Impact of Stock Index Futures Trading - A Revised Analysis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(5), pages 1-6.
    • Handle: RePEc:spt:apfiba:v:2:y:2012:i:5:f:2_5_6
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    Cited by:

    1. Liu, Shengnan & Yang, Linshan & Gu, Rongbao, 2023. "Can the introduction of stock index futures stabilize the volatility of the stock market? Evidence from the Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 44-58.

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