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Futures-Trading Activity and Share Price Volatility in South Africa

Futures-Trading Activity and Share Price Volatility in South Africa The study examines the relationship between futures-trading activity and equity volatility on the JSE for the three main indices. Contrary to findings in other markets, it is shown that positive correlation exists between equity volatility and expected and unexpected trading volumes in both the spot and futures markets. These conclusions seem robust to alternative specifications and indices used. Given an assumption of causality which runs from futures trading volumes to spot market volatility, the results are consistent with the idea that increasing trade in the futures market lead to greater volatility and price destabilisation in the share market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Investment Analysts Journal Taylor & Francis

Futures-Trading Activity and Share Price Volatility in South Africa

Investment Analysts Journal , Volume 26 (44): 9 – Jun 1, 1997
8 pages

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Publisher
Taylor & Francis
Copyright
© 1997 Taylor and Francis Group, LLC
ISSN
2077-0227
eISSN
1029-3523
DOI
10.1080/10293523.1997.11082367
Publisher site
See Article on Publisher Site

Abstract

The study examines the relationship between futures-trading activity and equity volatility on the JSE for the three main indices. Contrary to findings in other markets, it is shown that positive correlation exists between equity volatility and expected and unexpected trading volumes in both the spot and futures markets. These conclusions seem robust to alternative specifications and indices used. Given an assumption of causality which runs from futures trading volumes to spot market volatility, the results are consistent with the idea that increasing trade in the futures market lead to greater volatility and price destabilisation in the share market.

Journal

Investment Analysts JournalTaylor & Francis

Published: Jun 1, 1997

References