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The Impact of Stock Index Futures Trading on Daily Returns Seasonality: A Multicountry Study

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  • Robert W. Faff

    (RMIT University)

Abstract

In this article, we investigate the impact of the introduction of stock index futures trading on the daily returns seasonality of the underlying index for seven national markets. It has been previously argued that the introduction of futures trading should lead to reduced seasonality of mean returns, and generally our results support this conclusion. The impact of index futures introduction on return autocorrelations and volatility is also tested, and the evidence presented suggests that futures trading has no impact on the former, although a change in the seasonal for the latter was detected.

Suggested Citation

  • Robert W. Faff, 2002. "The Impact of Stock Index Futures Trading on Daily Returns Seasonality: A Multicountry Study," The Journal of Business, University of Chicago Press, vol. 75(1), pages 95-126, January.
    • Handle: RePEc:ucp:jnlbus:v:75:y:2002:i:1:p:95-126
    DOI: 10.1086/323506
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    Citations

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    Cited by:

    1. Sadia Anjum, 2020. "Impact of market anomalies on stock exchange: a comparative study of KSE and PSX," Future Business Journal, Springer, vol. 6(1), pages 1-11, December.
    2. Greppmair, Stefan & Theissen, Erik, 2019. "Small is beautiful? How the introduction of mini futures contracts affects the regular contract," CFR Working Papers 19-06, University of Cologne, Centre for Financial Research (CFR).
    3. Marco Lau & Yongyang Su & Na Tan & Zhe Zhang, 2014. "Hedging China’s energy oil market risks," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 4(1), pages 99-112, June.
    4. Bohl, Martin T. & Schuppli, Michael & Siklos, Pierre L., 2010. "Stock return seasonalities and investor structure: Evidence from China's B-share markets," China Economic Review, Elsevier, vol. 21(1), pages 190-201, March.
    5. Greppmair, Stefan & Theissen, Erik, 2022. "Small is beautiful? How the introduction of mini futures contracts affects the regular contracts," Journal of Empirical Finance, Elsevier, vol. 67(C), pages 19-38.
    6. Bohl, Martin T. & Schuppli, Michael & Siklos, Pierre L., 2010. "Stock return seasonalities and investor structure: Evidence from China's B-share markets," China Economic Review, Elsevier, vol. 21(1), pages 190-201, March.
    7. Loc Dong Truong & H. Swint Friday, 2021. "The Impact of the Introduction of Index Futures on the Daily Returns Anomaly in the Ho Chi Minh Stock Exchange," IJFS, MDPI, vol. 9(3), pages 1-14, August.
    8. repec:zbw:bofitp:2009_020 is not listed on IDEAS
    9. Ismail bin Ahmad & Fahmi bin Abdul Rahim, 2009. "International price relationship and volatility transmission between stock index and stock index futures," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 1(1), pages 61-75, April.
    10. Brian Lucey, 2004. "Robust estimates of daily seasonality in the Irish equity market," Applied Financial Economics, Taylor & Francis Journals, vol. 14(7), pages 517-523.

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