Open AccessThe Volatility Effect of Single-Stock Futures Trading on the Pakistani Stock Market
Author(s) -
Adil Awan,
Amir Rafique
Publication year - 2013
Publication title -
lahore journal of business
Language(s) - English
Resource type - Journals
ISSN - 2223-0025
DOI - 10.35536/ljb.2013.v2.i1.a3
Subject(s) - volatility (finance) , futures contract , volatility swap , stock exchange , forward volatility , financial economics , economics , econometrics , volatility smile , volatility risk premium , stock market , variance swap , stock (firearms) , implied volatility , finance , engineering , mechanical engineering , biology , horse , paleontology
The impact of single-stock futures on spot market volatility is still debated in the finance literature. The aim of this study is to analyze the effect of the introduction of single-stock futures on the volatility of the Karachi Stock Exchange (KSE). We examine changes in the level of volatility and structure after the introduction of single-stock futures, evaluating 24 companies listed on the KSE. The study applies the F-test to determine differences in variance as a traditional measure for volatility and uses GARCH (1,1) as an econometric technique for detecting time-varying volatility. The results show that there is no effect on the volatility level but that changes occur in the structure of volatility after stock futures trading.
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