alexa Does the Index Futures Destabilize the Underlying Spot Market? Some Evidence from Frensh Stock Exchange
ISSN: 2151-6219

Business and Economics Journal
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Research Article

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

Ayadi Chiraz*

University of economic and management, Sfax, Tunisia

*Corresponding Author:
Ayadi Chiraz
University of economic and management, Sfax, Tunisia
Tel: 21674278879
E-mail: [email protected]

Received Date: July 11, 2016; Accepted Date: August 25, 2016; Published Date: August 31, 2016

Citation: Chiraz A (2016) Does the Index Futures Destabilize the Underlying Spot Market? Some Evidence from Frensh Stock Exchange. Bus Eco J 7: 244. doi: 10.4172/2151-6219.1000244

Copyright: © 2016 Chiraz A. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

 

Abstract

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.

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