வணிகம் மற்றும் பொருளாதார இதழ்

Does the Index Futures Destabilize the Underlying Spot Market? Some Evidence from Frensh Stock Exchange

Abstract

Ayadi Chiraz

This paper examines the dynamic relationship between the futures and the spot frensh market. It aims to contribute in the literature by controlling for possible disturbances in the long-run equilibrium relationship between these two markets. The univariate analysis indicates that the stock prices evolve according to two different regimes: a low volatility regime and a high volatility regime. Our contribution is to determine the dynamics of the relationship which exists between spot and futures markets using the Markov-switching model. This econometric technique provides empirical and graphic evidence allowing of whether and of how the introduction of a futures market changes the variability structure of stock prices in the underlying spot market, it allows precisely to demonstrate the variabilities regimes shifts and reveals if the variability changes transitory or permanently. Our evidence from Markov switching approach suggests that futures have influence on spot market during both calm and turbulent periods, and that the introduction of the index futures has an effect of stabilizer on the stock market.