This paper contributes to the understanding of whether the introduction of smaller-sized and electronically traded index futures induces price speculation and destabilises the underlying asset market. By using a modified univariate conditional volatility model to examine the major indexes in the USA, this paper finds that the average return on stocks declined following the introduction of trading in E-mini futures contracts. Both in the short run and the long run, the unconditional volatility increases in the three spot indices following the introduction of E-mini futures contracts. In general, our results show that the introduction of mini-sized electronically traded index futures increases the volatility of the underlying asset.
|Number of pages||18|
|Journal||International Journal of Services, Technology and Management|
|State||Published - 1 Dec 2005|
- E-mini futures contracts
- Electronically traded markets
- Price speculation and destabilisation effects