The introduction of electronically traded index futures and their impact on the underlying assets: The case of US index futures

Huimin Chung, Shumei Chiang*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

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.

Original languageEnglish
Pages (from-to)609-626
Number of pages18
JournalInternational Journal of Services, Technology and Management
Volume6
Issue number6
DOIs
StatePublished - 1 Dec 2005

Keywords

  • E-mini futures contracts
  • Electronically traded markets
  • Price speculation and destabilisation effects

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