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Futures Market Volatility: What Has Changed?

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  • Nicolas P.B. Bollen
  • Robert E. Whaley

Abstract

The evolution of trading practices in futures markets, including growth of high‐frequency trading, has raised concerns about market quality. This study investigates whether excess futures return volatility, as an encompassing gauge of market quality, has changed over time. Daily measures of realized volatility are computed using 5‐minute returns of 15 electronically traded futures contracts. Two benchmarks are used to control for changes in the rate of information flow: option implied volatility and long horizon volatility estimates. Relative to the benchmarks, realized volatility has not changed, indicating that changes in trading practices have not led to a deterioration of market quality. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:426–454, 2015

Suggested Citation

  • Nicolas P.B. Bollen & Robert E. Whaley, 2015. "Futures Market Volatility: What Has Changed?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(5), pages 426-454, May.
    • Handle: RePEc:wly:jfutmk:v:35:y:2015:i:5:p:426-454
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    1. Shirazi, Elham & Jadid, Shahram, 2017. "Cost reduction and peak shaving through domestic load shifting and DERs," Energy, Elsevier, vol. 124(C), pages 146-159.
    2. Gianluca Piero Maria Virgilio, 2019. "High-frequency trading: a literature review," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 33(2), pages 183-208, June.
    3. Wang, Deshen & Chen, Bintong & Chen, Jing, 2019. "Credit card fraud detection strategies with consumer incentives," Omega, Elsevier, vol. 88(C), pages 179-195.
    4. Tian, Xiao & Duong, Huu Nhan & Kalev, Petko S., 2019. "Information content of the limit order book for crude oil futures price volatility," Energy Economics, Elsevier, vol. 81(C), pages 584-597.
    5. Xu Gong & Boqiang Lin, 2018. "Structural breaks and volatility forecasting in the copper futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(3), pages 290-339, March.
    6. Maki, Daiki & Ota, Yasushi, 2021. "Impacts of asymmetry on forecasting realized volatility in Japanese stock markets," Economic Modelling, Elsevier, vol. 101(C).
    7. Lindström, Annika & Berg, Hanna & Nordfält, Jens & Roggeveen, Anne L. & Grewal, Dhruv, 2016. "Does the presence of a mannequin head change shopping behavior?," Journal of Business Research, Elsevier, vol. 69(2), pages 517-524.
    8. Hao-Chang Yang & Ferry Syarifuddin & Chun-Ping Chang & Hai-Jie Wang, 2022. "The Impact of Exchange Rate Futures Fluctuations on Macroeconomy: Evidence from Ten Trading Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(8), pages 2300-2313, June.
    9. Nerini, Francesco Fuso & Andreoni, Antonio & Bauner, David & Howells, Mark, 2016. "Powering production. The case of the sisal fibre production in the Tanga region, Tanzania," Energy Policy, Elsevier, vol. 98(C), pages 544-556.
    10. Shirazi, Yosef & Carr, Edward & Knapp, Lauren, 2015. "A cost-benefit analysis of alternatively fueled buses with special considerations for V2G technology," Energy Policy, Elsevier, vol. 87(C), pages 591-603.
    11. Riekhof, Hans-Christian & Jacobi, Teresa, 2016. "Content-Marketing-Strategien in der Unternehmenspraxis: Eine empirische Analyse," PFH Forschungspapiere/Research Papers 2016/01, PFH Private University of Applied Sciences, Göttingen.
    12. Daiki Maki & Yasushi Ota, 2020. "The impacts of asymmetry on modeling and forecasting realized volatility in Japanese stock markets," Papers 2006.00158, arXiv.org.

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