Informational efficiency and spurious spillover effects between spot and derivatives markets

Sogiakas, V. and Karathanassis, G. (2015) Informational efficiency and spurious spillover effects between spot and derivatives markets. Global Finance Journal, 27, pp. 46-72. (doi: 10.1016/j.gfj.2015.04.004)

Abstract

Derivatives markets produce the means for price discovery as leading indicators in the transmission of new information. Examining volatility spillovers between spot and derivatives markets without accounting for possible disequilibria in the long term relationship could potentially result in spurious spillover effects. Our paper aims to contribute in this literature by controlling for possible disturbances in the long-run equilibrium relationship between the two markets. By application of a regime shift approach we provide evidence of a time varying spillover effect from derivatives to spot markets. However, this effect is inconclusive in the absence of a significant (1 − 1) cointegration relationship.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Sogiakas, Dr Vasilios
• Authors: Sogiakas, V., and Karathanassis, G.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Global Finance Journal
• Publisher: Elsevier
• ISSN: 1044-0283
• ISSN (Online): 1873-5665
• Copyright Holders: Copyright © 2015 Elsevier Ltd.
• First Published: First published in Global Finance Journal 2015 27:46-72
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher