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The effect of derivatives trading on volatility of the underlying asset: evidence from the Greek stock market

  • Evangelos Drimbetas
  • Nikolaos Sariannidis
  • Nicos Porfiris
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    In this article, the effects of the introduction of the futures and options into the FTSE/ASE 20 index on the volatility of the underlying index are studied. This particular issue is quite controversial since contradictory results have been found in various markets. Analysing the data (August 1997-April 2005) with the help of an EGARCH model it is shown that the introduction of derivatives has induced a reduction of the conditional volatility of the FTSE/ASE20 index and consequently it has increased its efficiency.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100500461702
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    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 17 (2007)
    Issue (Month): 2 ()
    Pages: 139-148

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    Handle: RePEc:taf:apfiec:v:17:y:2007:i:2:p:139-148
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