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Impact of foreign-listed single stock futures on the domestic underlying stock markets

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  • M. -W. Hung
  • C. -F. Lee
  • L. -C. So

Abstract

The purpose of this article is to investigate whether foreign-listed single stock futures (SSFs) would have any impact on their domestic underlying stock markets. GARCH (1,1) and GJR-GARCH (1,1) are used to analyse the data from the London International Financial Future and Options Exchange (LIFFE) in this research. Results show that the introduction of the foreign listed SSF contracts seems to have more explanatory power with respect to the higher volatility of their domestic spot markets than the announcement of the SSF contracts. Also, for two of the nine securities, the daily activity shocks of the foreign-listed SSFs are responsible for the higher conditional volatility of their home underlying stocks, while the activity that is forecastable but highly variable across days diminishes the conditional volatility of the underlying stocks.

Suggested Citation

  • M. -W. Hung & C. -F. Lee & L. -C. So, 2003. "Impact of foreign-listed single stock futures on the domestic underlying stock markets," Applied Economics Letters, Taylor & Francis Journals, vol. 10(9), pages 567-574.
    • Handle: RePEc:taf:apeclt:v:10:y:2003:i:9:p:567-574
    DOI: 10.1080/1350485032000100206
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    References listed on IDEAS

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    Cited by:

    1. Chris Brooks & Ryan J. Davies & Sang Soo Kim, 2005. "Cross Hedging with Single Stock Futures," ICMA Centre Discussion Papers in Finance icma-dp2004-15, Henley Business School, University of Reading.
    2. Richard D. F. Harris & Anirut Pisedtasalasai, 2006. "Return and Volatility Spillovers Between Large and Small Stocks in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9‐10), pages 1556-1571, November.

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