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Tham, Lucas Yew Jun (2022) The international effect of economic crises on the volatility of futures prices and the volatility of underlying spot prices of stock indexes and commodities. [Dissertation (University of Nottingham only)]

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Abstract

The recent 2 decades have seen more frequent high-volatility economic crises worldwide. A main question to be raised is whether these economic crises have an effect on the volatility of futures prices and the volatility of spot prices. This research also provides an opportunity to determine if there are any external factors that affect this relationship.

Futures are known to stabilize spot price volatility and are popular hedging devices. Historically, introducing futures to spot price markets usually results in market stabilization, destabilization, no observed effect or even spot price volatility caused by external market forces. The existence of black swan (sudden and unexpected) events during the recent 2008 and 2020 economic crises complicates the effectivity of futures prices further as the international market becomes more integrated.

To study the effect of economic crises on the volatility of futures prices and the volatility of spot prices, 16 international stock indexes and 12 commodities are studied across a 16-year period from 1st July 2005 to the 30th of June 2021. The study period encompasses the 2008 and 2020 economic crises to determine the existence and magnitude of this relationship, and in the process discover the effect of other economic crises and events. A combination of descriptive statistics, an event study analysis and the application of GARCH and EGARCH models are utilized in methodology.

Item Type:	Dissertation (University of Nottingham only)
Keywords:	economic crisis, futures, futures prices, spot prices, volatility, spot price volatility, futures price volatility, 2008 financial crisis, COVID-19, 2020 financial crisis, stock indexes, stock indices, commodities, commodity stocks, gold, silver, copper, platinum, palladium, crude oil, natural gas, S&P 500, CAC 40, Nikkei 225, SMI, ibovespa, EGARCH, GARCH, event study, spillover, black swan, daily figures, daily returns
Depositing User:	Tham, Lucas
Date Deposited:	26 Jul 2022 02:01
Last Modified:	26 Jul 2022 02:01
URI:	https://eprints.nottingham.ac.uk/id/eprint/69072

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