We would like to thank an anonymous referee and John Doukas, the Editor, for helpful comments. John Doukas, the Editor of European Financial Management for helpful comments. We would also like to thank the participants of the Financial Management Association Meeting 2008 for their useful comments. We are grateful to the Emerging Markets Group, Cass Business School, for financial support. Correspondence: Kate Phylaktis.
Margin Changes and Futures Trading Activity: a New Approach
Article first published online: 27 JAN 2013
© 2010 Blackwell Publishing Ltd
European Financial Management
Volume 19, Issue 1, pages 45–71, January 2013
How to Cite
Phylaktis, K. and Aristidou, A. (2013), Margin Changes and Futures Trading Activity: a New Approach. European Financial Management, 19: 45–71. doi: 10.1111/j.1468-036X.2012.00565.x
- Issue published online: 27 JAN 2013
- Article first published online: 27 JAN 2013
- margin requirements;
- financial market volatility-volume;
- Athens Stock Exchange
In this paper we examine the impact of margins, adjusted for underlying price risk proxied by market volatility, on trading volume and incorporate the relationship between trading volume and price volatility documented in stock markets. We estimate a bivariate GARCH-M model to take account of the inter-relationships and apply them to the Greek derivatives market over the period 1999–2005. The results show that when adjusting margins for market risk there is no impact on trading volume, casting doubts on the results of previous research, and providing support for the view that margin requirements are used only as a mechanism to prevent trader default.