Futures price variability: a test of maturity and volume effects
Article Abstract:
Contract-disaggregated data on futures' prices are used to obtain evidence on the mixture of distributions hypothesis (MDH), on the maturity effect on price variability and volume of trading, and on the contemporaneous and sequential relation between these variables. Strong positive contemporaneous correlations between trading volume and price volatility, consistent with the MDH, are documented. While maturity has a strong effect on volume, no such relation is found for price variability. Maturity is not a suitable surrogate for the common directing variable under MDH. There are a significant number of cases in which a sequential relation exists between price variability and volume; however, in the majority of cases, futures' contract price variability and trading volumes are contemporaneously correlated.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1986
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The effects of changing margin levels on futures market activity, the composition of traders in the market, and price performance
Article Abstract:
The effect (and usefulness) of margin requirements in controlling excessive speculation in futures markets is examined. It is assumed that the effect of changes in margin requirements will vary across different trader groups. An empirical analysis of the effects of changes in margin requirements indicates that margin changes have a significant effect on the composition of traders and the activity in the market. However, the direction and magnitude of changes in the composition of traders in the market are not predictable without knowledge of the liquidity costs and risk preferences of the various trader groups. It is, therefore, unnecessary and unwise to regulate margin levels to reduce excessive speculation.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1986
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Futures markets and the fluctuations in inflation, monetary growth, and asset returns
Article Abstract:
Futures contracts in price indices would alleviate some of the adverse consequences of inflation by providing a convenient way to hedge the risks from inflation and by enhancing information about prices. The role of price-index futures in an environment of volatile inflation and interest rates is analyzed. Futures contracts on price indices are shown to be analogous to index bonds. The recent experience of the United Kingdom with indexed financial instruments shows a significant level of demand. Results of the study suggest that the implementation of a futures market in price indices would have beneficial effects on macroeconomic variables such as output, employment, and investment.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1986
User Contributions:
Comment about this article or add new information about this topic:
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