کشف قیمت و سرریز نوسانات در شاخص بازارهای آتی : برخی شواهد از مکزیک

This paper investigates the hypotheses that the recently established Mexican stock index futures market effectively serves the price discovery function, and that the introduction of futures trading has provoked volatility in the underlying spot market. We test both hypotheses simultaneously with daily data from Mexico in the context of a modified EGARCH model that also incorporates possible cointegration between the futures and spot markets. The evidence supports both hypotheses, suggesting that the futures market in Mexico is a useful price discovery vehicle, although futures trading has also been a source of instability for the spot market. Several managerial implications are derived and discussed.

Under perfectly efficient markets, new information is impounded simultaneously into cash and futures markets. However, in reality, institutional factors such as liquidity, transaction costs, and other market restrictions may produce an empirical lead–lag relationship between price changes in the two markets. Futures markets could incorporate new information more quickly than do cash markets given their inherent leverage, low transaction costs, and lack of short-sale restrictions (Tse, 1999). Several studies suggest that futures markets play a critical role in price discovery for the underlying spot market (Chatrath et al., 1999; Lien and Tse, 2000; Yang et al., 2001). This price discovery function implies that prices in the futures and spot markets are systematically related in the short run and/or in the long run. In the cointegration jargon, the price discovery function implies the presence of an equilibrium relation binding the two prices together. If a departure from equilibrium occurs, prices in one or both markets should adjust to correct the disparity. Advocates of futures trading like Schreiber and Schwartz (1986) and Edwards (1988) argue that the futures market is a source of price stability since it absorbs the brunt of the price adjustments. In addition, they argue that futures markets provide important information to investors on subsequent movements in spot prices, enabling them to more effectively manage exposure to cash market risks (see also Darrat and Rahman, 1995; Pericli and Koutmos, 1997; Darrat et al., 2002). Yet, challengers of futures markets like Kawaller et al. (1987), Harris (1989), Antoniou and Holmes (1995) and Koutmos and Tucker (1996), charge that futures trading, especially by institutional investors, unduly influences spot prices and triggers excessive volatility due to the speculative nature of derivative activities. The detrimental economic and financial consequences of the alleged market volatility prompt some analysts and regulators to call for limiting futures trading activities. In fact, the US Committee on Banking, Finance and Urban Affairs (1988) went as far as recommending the elimination of these markets altogether. Research on the price discovery role of futures markets and their possible volatility implications for the spot market generally focuses on the US and a few other developed markets. This paper examines the case for Mexico that has recently established index futures trading. At least two main features distinguish our analysis in this paper. First, we improve the statistical efficiency of our results by simultaneously testing, in the context of a unified econometric framework, the price discovery function of the Mexican futures market together with the hypothesis that futures trading propagates volatility in the underlying spot market. Second, to avoid possible omission-of-variable biases in the conditional first- and second-moments, we extend the univariate exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model to a bivariate error-correction EGARCH model (dubbed an EC-EGARCH) to incorporate the underlying long-run relations between index and index futures markets both in the conditional means and variances. Our EC-EGARCH model allows the conditional volatilities and covariance to adjust to deviations from long-run price disequilibria, whereas traditional EGARCH models do not. As such, the model facilitates the testing of both short run and long run volatility spillovers hypotheses. The proposed model is also superior to vector error-correction models (VECMs) since the latter models overlook the dynamics in conditional variances (Yang et al., 2001). The EC-EGARCH model may further prove useful for portfolio managers in formulating optimal hedging strategies. Some studies (e.g., Yang et al., 2001) emphasize the need to incorporate any existing cointegration between spot and futures prices into hedging decisions, while others (e.g., Lien and Lou, 1994) underscore the importance of GARCH effects in such decisions. Our model combines both suggestions for Mexico by allowing for the time-varying behavior of moments of returns as well as incorporating the error-correction term from the spot/futures price equilibrium in both the first- and second-moments of the returns. The remainder of the paper is organized as follows. Section 2 describes the Mexican stock index and index futures data and their stochastic properties. Section 3 briefly discusses alternative hypotheses to be tested and the testing methodology. Section 4 reports the empirical results, and Section 5 concludes the paper.

This paper investigates for the emerging market of Mexico the hypotheses that the futures market effectively serves the price discovery function, and that futures trading provokes volatility in the spot market. We test both hypotheses simultaneously with daily data in the context of a modified EGARCH model that incorporates short-run dynamics while preserving the underlying cointegrating relation between the two markets in both the conditional means and conditional variances. The results are consistent with both hypotheses, suggesting that the newly established futures market in Mexico is a useful price discovery vehicle, although futures trading has also been a source of instability for the spot market. Our results further show that short-run innovations originating from either market provoke volatility in the other market, and that deviation from the long-run price equilibrium also propagates volatility in both markets. Such pronounced volatility spillovers could be attributable to certain institutional features of the Mexican market. In particular, the narrow base of the IPC index could invite excessive program trading, which then becomes the conduit for transmitting volatility between the two markets. In this environment, Mexican regulators of the newly established futures market may find some devices like circuit breakers, margin requirements and arbitrage supervisions necessary to prevent futures trading from becoming a new source of instability in the spot market.