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THE IMPACT OF DERIVATIVES ON THE VOLATILITY OF TURKISH STOCK MARKET

Year 2018, 17. UIK Special Issue, 857 - 868, 04.07.2018
https://doi.org/10.18092/ulikidince.430301

Abstract

The interaction among futures and spot markets has been one of the most
important issues of the financial markets since the launch of stock index
futures by Kansas City Board of Trade in 1982. The main characteristics of
derivatives such as having lower transaction costs, higher leverage, higher
liquidity and higher flexibility compared to spot markets make them attractive
for investors. Besides, derivatives trading are crucial for financial system
participants in order to diversify portfolio and minimise risks. The aim of
this paper is to emphasize the importance of derivative securities by providing
evidence from an emerging stock market, Turkey. In order to emphasize the need
for derivatives in the Turkish market, the impact of introduction of index
futures and index options trading on the underlying spot market volatility are
empirically analysed. Conditional and unconditional volatility of Borsa
Istanbul 30 Index is examined using GARCH model starting from its first trade
day of January 2, 1997. 

References

  • Alexakis, P. (2007). On the Effect of Index Futures Trading on Stock Market Volatility. International Research Journal of Finance and Economics , 11, 7-20.Antoniou, A., & Holmes, P. (1995). Futures Trading, Information and Spot Price Volatility: Evidence for the FTSE-100 Stock Index Futures Contract Using GARCH. Journal of Banking and Finance , 19, 117-129.Bae, S., Kwon, T., & Park, J. (2004). Futures Trading, Spot Market Volatility, and Market Efficiency: The Case of the Korean Index Futures Markets. The Journal of Futures Markets , 24 (12), 1195-1228.Baklaci, H., & Tutek, H. (2006). The Impact of the Futures Market on Spot Volatility: An Analysis in Turkish Derivatives Markets. In M. C. Brebbia (Ed.). Southampton UK: WIT Press.Becchetti, L., & Caggese, A. (2000). Effects of Index Option Introduction on Stock Index Volatility: The Procedure for Empirical Testing Based on SSC-GARCH Models. Applied Financial Economics , 10, 323-341.Bohl, M., Salm, C., & Wilfling, B. (2011). Do Individual Index Futures Investors Destabilize the Underlying Spot Market? The Journal of Futures Markets , 31 (1), 81-101.Bologna, P., & Cavallos, L. (2002). Does the Introduction of Stock Index Futures Effectively Reduce Stock Market Volatility? Is the `Futures Effect’ Immediate? Evidence from the Italian Stock Exchange Using GARCH. Applied Financial Economics , 12, 183-192.Brorsen, B. (1991). Futures Trading, Transaction Costs, and Stock Market Volatility. Journal of Futures Markets , 11, 153-163.Butterworth, D. (2000). The Impact of Futures Trading on Underlying Stock Index Volatility: The Case of the FTSE Mid 250 Contract. Applied Economics Letters , 7, 439-442.Caglayan, E. (2011). The Impact of Stock Index Futures on the Turkish Spot Market. Journal of Emerging Market Finance , 10 (1), 73-91.Chiang, M., & Wang, C. (2002). The Impact of Futures Trading on Spot Index Volatility: Evidence for Taiwan Index Futures. Applied Economics Letters , 9, 381-385.Darrat, A., & Rahman, S. (1995). Has Futures Trading Activity Caused Stock Price Volatility? Journal of Futures Markets , 15, 537-557.Debasish, S. (2009). Effect of Futures Trading on Spot Price Volatility: Evidence for NSE Nifty Using GARCH. The Journal of Risk Finance , 10 (1), 67-77.Doganay, M., Ceylan, N., Tokat, E., & Aktas, R. (2013). A Re-examination of Return and Volatility Dynamics in the ISE 30 Cash and Futures Markets. Journal of Emerging Issues in Economics, Finance and Banking , 2 (1), 599-615.Edwards, F. (1988a). Does Futures Trading Increase Stock Market Volatility? Financial Analyst Journal , 44 (1), 63-69.Edwards, F. (1988b). Futures Trading and Cash Market Volatility: Stock Index and Interest Rate Futures. Journal of Futures Markets , 8, 421-439..Gulen, H., & Stewart, M. (2000). Stock Index Futures Trading and Volatility in International Equity Markets. Journal of Futures Markets , 20, 661-686.Harris, L. (1989). S & P 500 Spot Stock Price Volatilities. Journal of Finance , 44, 1155-1175.Hull, J. (2012). Options, Futures and Oher Derivatives (Eighth Edition ed.). Essex: Pearson.Kan, C. (1999). The Effect of Index Futures Trading on Volatility of HIS Constituent Stocks. Pacific-Basin Finance Journal , 5, 105-114.Kasman, A., & Kasman, S. (2008). The impact of futures trading on volatility of the underlying asset in the Turkish Stock Market. Physica A: Statistical Mechanics and Its Applications , 387 (12), 2837-2845.Kayalidere, K., Araci, H., & Aktas, H. (2012). Interation Between Derivatives and Spot Markets: An Analysis on VOB. The Journal of Accounting and Finance , 137-154.Lee, S., & Ohk, K. (1992). Stock Index Futures Listing Structural Change in Time Varying Volatility. Journal of Futures Markets , 12, 493-509.Maberly, E., Allen, D., & Gilbert, R. (1989). An Analysis of Trading and Non-trading Period Returns for the Value Line Composite Index; Spot versus Futures: A Note. Journal of Futures Markets , 7 (5), 497-500.Pillar, C., & Rafael, S. (2002). Does Derivatives Trading Destabilize the Underlying Assets? Evidence from Spanish Stock Market. Applied Economics Letters , 9, 107-110.Poshakwale, S., & Pok, W. (2004). The Impact of Introduction of Futures Contracts on the Spot Market Volatility: The Case of Kuala Lumpur Stock Exchange. Applied Financial Economics , 143-154.Ross, S. (1989). Information and Volatility: The No-Arbitrage Martingale Approach to Timing and Resolution Irrelevancy. The Journal of Finance , 44 (1), 1-17.Ryoo, H., & Smith, G. (2004). The Impact of Stock Index Futures on the Korean Stock Market. Applied Financial Economics , 14, 243-251.Spyrou, S. (2005). Index Futures Trading and Spot Price Volatility: Evidence from an Emerging Market. Journal of Emerging Market Finance , 4 (2), 151-167.Vipul. (2006). mpact of the Introduction of Derivatives on Underlying Volatility: Evidence from India. Applied Financial Economics , 16, 687-697.Xie, S., & Huang, J. (2014). The Impact of Index Futures on Spot Market Volatility in China. Emerging Markets Finance & Trade , 50 (1), 167-177.Yu, S. (2001). Index Futures Trading and Spot Price Volatility. Applied Economics Letters , 8, 183-186.Zhong, M., Darrat, A., & Otero, R. (2004). Price Discovery and Volatility Spillovers in Index Futures Markets: Some Evidence from Mexico. Journal of Banking & Finance , 28, 3037-3054.
Year 2018, 17. UIK Special Issue, 857 - 868, 04.07.2018
https://doi.org/10.18092/ulikidince.430301

Abstract

References

  • Alexakis, P. (2007). On the Effect of Index Futures Trading on Stock Market Volatility. International Research Journal of Finance and Economics , 11, 7-20.Antoniou, A., & Holmes, P. (1995). Futures Trading, Information and Spot Price Volatility: Evidence for the FTSE-100 Stock Index Futures Contract Using GARCH. Journal of Banking and Finance , 19, 117-129.Bae, S., Kwon, T., & Park, J. (2004). Futures Trading, Spot Market Volatility, and Market Efficiency: The Case of the Korean Index Futures Markets. The Journal of Futures Markets , 24 (12), 1195-1228.Baklaci, H., & Tutek, H. (2006). The Impact of the Futures Market on Spot Volatility: An Analysis in Turkish Derivatives Markets. In M. C. Brebbia (Ed.). Southampton UK: WIT Press.Becchetti, L., & Caggese, A. (2000). Effects of Index Option Introduction on Stock Index Volatility: The Procedure for Empirical Testing Based on SSC-GARCH Models. Applied Financial Economics , 10, 323-341.Bohl, M., Salm, C., & Wilfling, B. (2011). Do Individual Index Futures Investors Destabilize the Underlying Spot Market? The Journal of Futures Markets , 31 (1), 81-101.Bologna, P., & Cavallos, L. (2002). Does the Introduction of Stock Index Futures Effectively Reduce Stock Market Volatility? Is the `Futures Effect’ Immediate? Evidence from the Italian Stock Exchange Using GARCH. Applied Financial Economics , 12, 183-192.Brorsen, B. (1991). Futures Trading, Transaction Costs, and Stock Market Volatility. Journal of Futures Markets , 11, 153-163.Butterworth, D. (2000). The Impact of Futures Trading on Underlying Stock Index Volatility: The Case of the FTSE Mid 250 Contract. Applied Economics Letters , 7, 439-442.Caglayan, E. (2011). The Impact of Stock Index Futures on the Turkish Spot Market. Journal of Emerging Market Finance , 10 (1), 73-91.Chiang, M., & Wang, C. (2002). The Impact of Futures Trading on Spot Index Volatility: Evidence for Taiwan Index Futures. Applied Economics Letters , 9, 381-385.Darrat, A., & Rahman, S. (1995). Has Futures Trading Activity Caused Stock Price Volatility? Journal of Futures Markets , 15, 537-557.Debasish, S. (2009). Effect of Futures Trading on Spot Price Volatility: Evidence for NSE Nifty Using GARCH. The Journal of Risk Finance , 10 (1), 67-77.Doganay, M., Ceylan, N., Tokat, E., & Aktas, R. (2013). A Re-examination of Return and Volatility Dynamics in the ISE 30 Cash and Futures Markets. Journal of Emerging Issues in Economics, Finance and Banking , 2 (1), 599-615.Edwards, F. (1988a). Does Futures Trading Increase Stock Market Volatility? Financial Analyst Journal , 44 (1), 63-69.Edwards, F. (1988b). Futures Trading and Cash Market Volatility: Stock Index and Interest Rate Futures. Journal of Futures Markets , 8, 421-439..Gulen, H., & Stewart, M. (2000). Stock Index Futures Trading and Volatility in International Equity Markets. Journal of Futures Markets , 20, 661-686.Harris, L. (1989). S & P 500 Spot Stock Price Volatilities. Journal of Finance , 44, 1155-1175.Hull, J. (2012). Options, Futures and Oher Derivatives (Eighth Edition ed.). Essex: Pearson.Kan, C. (1999). The Effect of Index Futures Trading on Volatility of HIS Constituent Stocks. Pacific-Basin Finance Journal , 5, 105-114.Kasman, A., & Kasman, S. (2008). The impact of futures trading on volatility of the underlying asset in the Turkish Stock Market. Physica A: Statistical Mechanics and Its Applications , 387 (12), 2837-2845.Kayalidere, K., Araci, H., & Aktas, H. (2012). Interation Between Derivatives and Spot Markets: An Analysis on VOB. The Journal of Accounting and Finance , 137-154.Lee, S., & Ohk, K. (1992). Stock Index Futures Listing Structural Change in Time Varying Volatility. Journal of Futures Markets , 12, 493-509.Maberly, E., Allen, D., & Gilbert, R. (1989). An Analysis of Trading and Non-trading Period Returns for the Value Line Composite Index; Spot versus Futures: A Note. Journal of Futures Markets , 7 (5), 497-500.Pillar, C., & Rafael, S. (2002). Does Derivatives Trading Destabilize the Underlying Assets? Evidence from Spanish Stock Market. Applied Economics Letters , 9, 107-110.Poshakwale, S., & Pok, W. (2004). The Impact of Introduction of Futures Contracts on the Spot Market Volatility: The Case of Kuala Lumpur Stock Exchange. Applied Financial Economics , 143-154.Ross, S. (1989). Information and Volatility: The No-Arbitrage Martingale Approach to Timing and Resolution Irrelevancy. The Journal of Finance , 44 (1), 1-17.Ryoo, H., & Smith, G. (2004). The Impact of Stock Index Futures on the Korean Stock Market. Applied Financial Economics , 14, 243-251.Spyrou, S. (2005). Index Futures Trading and Spot Price Volatility: Evidence from an Emerging Market. Journal of Emerging Market Finance , 4 (2), 151-167.Vipul. (2006). mpact of the Introduction of Derivatives on Underlying Volatility: Evidence from India. Applied Financial Economics , 16, 687-697.Xie, S., & Huang, J. (2014). The Impact of Index Futures on Spot Market Volatility in China. Emerging Markets Finance & Trade , 50 (1), 167-177.Yu, S. (2001). Index Futures Trading and Spot Price Volatility. Applied Economics Letters , 8, 183-186.Zhong, M., Darrat, A., & Otero, R. (2004). Price Discovery and Volatility Spillovers in Index Futures Markets: Some Evidence from Mexico. Journal of Banking & Finance , 28, 3037-3054.
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Details

Primary Language English
Journal Section Articles
Authors

Aysegul Cımen

Publication Date July 4, 2018
Published in Issue Year 2018 17. UIK Special Issue

Cite

APA Cımen, A. (2018). THE IMPACT OF DERIVATIVES ON THE VOLATILITY OF TURKISH STOCK MARKET. Uluslararası İktisadi Ve İdari İncelemeler Dergisi857-868. https://doi.org/10.18092/ulikidince.430301

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