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Volatility and skewness spillover between stock index and stock index futures markets during a crash period: New evidence from China

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  • Hou, Yang (Greg)
  • Li, Steven
Abstract
This paper examines volatility and skewness spillover between Chinese stock index and index futures markets during the market crash in 2015. The results reveal that the volatility spillover from futures to spot is significant and stronger than the other way around and the transmission of downside risk is bilateral with the futures market taking the lead. Moreover, the measures announced during the market crash to curb the speculative futures trading appears to enhance the spillover of both volatility and skewness from futures to spot markets. This paper thus sheds some light on the validity of such measures to restore market efficiency during a stock market crash.

Suggested Citation

  • Hou, Yang (Greg) & Li, Steven, 2020. "Volatility and skewness spillover between stock index and stock index futures markets during a crash period: New evidence from China," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 166-188.
    • Handle: RePEc:eee:reveco:v:66:y:2020:i:c:p:166-188
    DOI: 10.1016/j.iref.2019.11.003
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    More about this item

    Keywords

    Volatility spillover; Skewness spillover; GARCH model; Skewed Student's t distribution; Chinese stock market crash; Chinese stock index futures;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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