IDEAS home Printed from https://ideas.repec.org/p/ivi/wpasec/2006-05.html
   My bibliography  Save this paper

New Evidence On Expiration-Day Effects Using Realized Volatility: An Intraday Analysis For The Spanish Stock Exchange

Author

Listed:
  • Juan A. Lafuente

    () (Universitat Jaume I)

  • Manuel Illueca Muñoz

    (Universitat Jaume I)

Abstract

In this paper we provide additional evidence on expiration effects in the Ibex 35 stock index futures market using realized volatility as proposed in Andersen et al. (2003, Econometrica 71, 529-626). Our findings reveal not only a significant increase in spot trading activity, but also the existence of a significant jump in spot volatility at index futures expiration. Moreover, we analyze the importance of the data frequency considered, revealing that the use of GARCH methodology from daily data does not have the ability to statistically assess such expiration-day effect. Additional empirical evidence is provided for the S&P 500 stock index futures market. Neither unconditional nor conditional realized volatility has a significant increase at expiration for the US market, suggesting that this effect is specific for the Spanish market, at least for the period analyzed. Este artículo proporciona nueva evidencia empírica sobre el efecto del vencimiento de los contratos de futuros sobre el índice IBEX 35, utilizando la medida de volatilidad realizada propuesta en Andersen et al. (2003, Econometrica 71, 529-626). Nuestros resultados ponen de manifiesto que al vencimiento de los contratos de futuros se produce no sólo un incremento en el volumen negociado en el mercado de contado, sino también un incremento significativo de la volatilidad del activo subyacente. Además, el trabajo pone de manifiesto la importancia de contar con información intradía para llevar a cabo el análisis empírico. De hecho, el uso de la metodología GARCH a partir de datos diarios no permite apreciar las anomalías que se producen en el mercado de contado cuando vencen los contratos de futuros. También se proporciona evidencia empírica relativa al mercado de futuros sobre el índice S&P 500. En este caso, ni la volatilidad condicionada ni la volatilidad no condicionada aumentan significativamente en los días de vencimiento de los contratos de futuros, sugiriendo que la evidencia reportada en este trabajo constituye una característica específica del mercado español, al menos durante el periodo analizado.

Suggested Citation

  • Juan A. Lafuente & Manuel Illueca Muñoz, 2006. "New Evidence On Expiration-Day Effects Using Realized Volatility: An Intraday Analysis For The Spanish Stock Exchange," Working Papers. Serie EC 2006-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasec:2006-05
    as

    Download full text from publisher

    File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-2006-05.pdf
    File Function: Fisrt version / Primera version, 2006
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Vicent Arago & A. Fernandez, 2002. "Expiration and maturity effect: empirical evidence from the Spanish spot and futures stock index," Applied Economics, Taylor & Francis Journals, vol. 34(13), pages 1617-1626.
    2. Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Epps, Thomas W & Epps, Mary Lee, 1976. "The Stochastic Dependence of Security Price Changes and Transaction Volumes: Implications for the Mixture-of-Distributions Hypothesis," Econometrica, Econometric Society, vol. 44(2), pages 305-321, March.
    4. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Heiko Ebens, 2000. "The Distribution of Stock Return Volatility," NBER Working Papers 7933, National Bureau of Economic Research, Inc.
    5. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
    6. Rahman, Shafiqur & Lee, Cheng-few & Ang, Kian Ping, 2002. "Intraday Return Volatility Process: Evidence from NASDAQ Stocks," Review of Quantitative Finance and Accounting, Springer, vol. 19(2), pages 155-180, September.
    7. M. Illueca & J. A. Lafuente, 2003. "The effect of spot and futures trading on stock index market volatility: A nonparametric approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 23(9), pages 841-858, September.
    8. Hans R. Stoll & Robert E. Whaley, 1997. "Expiration†Day Effects of the All Ordinaries Share Price Index Futures: Empirical Evidence and Alternative Settlement Procedures," Australian Journal of Management, Australian School of Business, vol. 22(2), pages 139-174, December.
    9. Stoll, Hans R & Whaley, Robert E, 1990. "Program Trading and Individual Stock Returns: Ingredients of the Triple-Witching Brew," The Journal of Business, University of Chicago Press, vol. 63(1), pages 165-192, January.
    10. Connolly, Robert A., 1989. "An Examination of the Robustness of the Weekend Effect," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(02), pages 133-169, June.
    11. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
    12. Suominen, Matti, 2001. "Trading Volume and Information Revelation in Stock Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 545-565, December.
    13. Lamoureux, Christopher G & Lastrapes, William D, 1990. " Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects," Journal of Finance, American Finance Association, vol. 45(1), pages 221-229, March.
    14. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2003. "Modeling and Forecasting Realized Volatility," Econometrica, Econometric Society, pages 579-625.
    15. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 125-132.
    16. Copeland, Thomas E, 1976. "A Model of Asset Trading under the Assumption of Sequential Information Arrival," Journal of Finance, American Finance Association, vol. 31(4), pages 1149-1168, September.
    17. Andersen, Torben G, 1996. " Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance, American Finance Association, vol. 51(1), pages 169-204, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Julien Chevallier & Benoît Sévi, 2011. "On the realized volatility of the ECX CO 2 emissions 2008 futures contract: distribution, dynamics and forecasting," Annals of Finance, Springer, pages 1-29.
    2. Vortelinos, Dimitrios I. & Lakshmi, Geeta, 2015. "Market risk of BRIC Eurobonds in the financial crisis period," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 295-310.
    3. Matthew Clifton, 2010. "Liquidity and Efficiency During Unusual Market Conditions: An Analysis of Short Selling Restrictions and Expiration-Day Procedures on the London Stock Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 14.
    4. repec:dau:papers:123456789/4598 is not listed on IDEAS
    5. Ané, Thierry & Métais, Carole, 2009. "The distribution of realized variances: Marginal behaviors, asymmetric dependence and contagion effects," International Review of Financial Analysis, Elsevier, vol. 18(3), pages 134-150, June.

    More about this item

    Keywords

    Mercados de futuros; Volatilidad realizada; Desestabilización del mercado de contado Futures Markets; Realized volatility; spot market destabilization;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ivi:wpasec:2006-05. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición). General contact details of provider: http://edirc.repec.org/data/ievages.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.