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Can exchange seat prices predict financial market volatility?

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  • Taewoo You
  • Mark E. Holder

Abstract

There is considerable evidence that trading volume and volatility are positively related and that exchange seat prices are largely a function of trading volume. This article examines whether changes in seat prices at the Chicago Board of Trade (where stock index and interest rate futures account for the vast majority of trading volume) are useful in predicting changes in interest rate and stock market volatility. Exponential GARCH and transfer function models are used to demonstrate the power of changes in CBOT seat prices in predicting changes in interest rate and stock market volatility. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:1206–1221, 2008

Suggested Citation

  • Taewoo You & Mark E. Holder, 2008. "Can exchange seat prices predict financial market volatility?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 28(12), pages 1206-1221, December.
    • Handle: RePEc:wly:jfutmk:v:28:y:2008:i:12:p:1206-1221
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    1. Emm, Ekaterina E. & Gay, Gerald D. & Ma, Han & Ren, Honglin, 2021. "The rise and breakup of the commodity exchange membership: An analysis of CBOT seat prices," Journal of Commodity Markets, Elsevier, vol. 24(C).

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