Information and volatility in futures and spot markets: The Case of the Japanese yen

Market interactions in returns and volatilities between spot and forward shipping freight markets

“…In route 1, the coefficient of the volatility spillover from spot to FFA is insignificant ()0.00006), while the coefficient of the volatility spillover from FFA to spot is significant (0.117), which implies that there is a unidirectional volatility spillover from the FFA to the spot market. The finding, that only FFA volatility affects spot volatility, is consistent with the empirical work of Koutmos and Tucker (1996), Chatrath and Song (1998), amongst others. In route 1A, the coefficients of volatility spillovers for both markets are highly insignificant, indicating that there is no volatility spillover from any market to the other.…”

“…In the currency futures market, Chatrath and Song (1998) examine for volatility spillover relationships the spot and futures markets for the Japanese Yen versus the US Dollar. They argue that the futures volatility influences the spot market volatility due to the faster incorporation of new market related information, such as macroeconomic announcements in the United States.…”

News announcements and price discovery in foreign exchange spot and futures markets

“…That is, the level of transparency in the FX spot market is lower, and the exchange rate may respond more slowly to information related to fundamentals, in contrast with the FX futures market on the Chicago Mercantile Exchange (CME). Crain and Lee (1995), Chatrath and Song (1998), Martens and Kofman (1998), Rosenberg and Traub (2009), and Tse et al (2006) reveal that the FX futures market contributes more to price discovery than does the spot market.…”

“…1 Few studies compare the relative contribution of FX spot and futures markets to price discovery when news releases occur. However, when they compare the volatility spillover between FX spot and futures markets, both Crain and Lee (1995) and Chatrath and Song (1998) find that the volatility spillover from the futures market to the spot market is more prominent on announcement days. This finding relates to the difference in market quality of the FX spot and futures markets.…”

“…Unlike Crain and Lee (1995) and Chatrath and Song (1998), who use the volatility spillover relationship to determine which market reacts to information more rapidly, we employ the information share approach and the common factor component weight 0378-4266/$ -see front matter Ó 2010 Elsevier B.V. All rights reserved. doi:10.1016/j.jbankfin.2010.03.009 approach to explore the evolution of price discovery.…”