TY - JOUR
T1 - Intraday volatility spillovers between spot and futures indices
T2 - Evidence from the Korean stock market
AU - Kang, Sang Hoon
AU - Cheong, Chongcheul
AU - Yoon, Seong Min
N1 - Funding Information:
This work was supported by the National Research Foundation granted by the Korean Government ( NRF-2010-371-B00008 ).
PY - 2013/4/15
Y1 - 2013/4/15
N2 - This study provides empirical evidence of the relationship between spot and futures markets in Korea. In particular, the study focuses on the volatility spillover relationship between spot and futures markets by using three high-frequency (10 min, 30 min, and 1 h time-scales) intraday data sets of KOSPI 200 spot and futures contracts. The results indicate a strong bi-directional causal relationship between futures and spot markets, suggesting that return volatility in the spot market can influence that in the futures market and vice versa. Thus, the results indicate that new information is reflected in futures and spot markets simultaneously. This bi-directional causal relationship provides market participants with important guidance on understanding the intraday information transmission between the two markets. Thus, on a given trading day, there may be sudden and sharp increases or decreases in return volatility in the Korean stock market as a result of positive feedback and synchronization of spot and futures markets.
AB - This study provides empirical evidence of the relationship between spot and futures markets in Korea. In particular, the study focuses on the volatility spillover relationship between spot and futures markets by using three high-frequency (10 min, 30 min, and 1 h time-scales) intraday data sets of KOSPI 200 spot and futures contracts. The results indicate a strong bi-directional causal relationship between futures and spot markets, suggesting that return volatility in the spot market can influence that in the futures market and vice versa. Thus, the results indicate that new information is reflected in futures and spot markets simultaneously. This bi-directional causal relationship provides market participants with important guidance on understanding the intraday information transmission between the two markets. Thus, on a given trading day, there may be sudden and sharp increases or decreases in return volatility in the Korean stock market as a result of positive feedback and synchronization of spot and futures markets.
KW - Bi-directional causality
KW - Positive feedback
KW - Self-organized criticality
KW - Synchronization
KW - Volatility spillover
UR - http://www.scopus.com/inward/record.url?scp=84873731077&partnerID=8YFLogxK
U2 - 10.1016/j.physa.2013.01.017
DO - 10.1016/j.physa.2013.01.017
M3 - Article
AN - SCOPUS:84873731077
SN - 0378-4371
VL - 392
SP - 1795
EP - 1802
JO - Physica A: Statistical Mechanics and its Applications
JF - Physica A: Statistical Mechanics and its Applications
IS - 8
ER -