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Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets

Year 2014, Volume: 4 Issue: 2, 411 - 426, 01.06.2014

Abstract

This study examines the effects that Contracts for Difference (CFDs) have had on the Australian equity market, either as an accelerant for mispricing, or as a source of increased market functionality through the addition of a new tradable product and increased liquidity. The Australian Securities Exchange (ASX) made the decision to segregate CFDs to a separate ring-fenced exchange in November 2007. This study uses EGARCH techniques to test for the effects of CFDs on return volatility at the time of CFD inclusion and segregation in Australian equity markets at the index and equity-specific level. A fully worked explanation and example of a CFD-influenced ‘overhang’ is also provided. The results provide evidence that cannot reject the presence of ‘overhangs’ in Australian equity markets.

Year 2014, Volume: 4 Issue: 2, 411 - 426, 01.06.2014

Abstract

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Details

Other ID JA45AZ34VD
Journal Section Research Article
Authors

Shaen Corbet This is me

Cian Twomey This is me

Publication Date June 1, 2014
Published in Issue Year 2014 Volume: 4 Issue: 2

Cite

APA Corbet, S., & Twomey, C. (2014). Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets. International Journal of Economics and Financial Issues, 4(2), 411-426.
AMA Corbet S, Twomey C. Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets. IJEFI. June 2014;4(2):411-426.
Chicago Corbet, Shaen, and Cian Twomey. “Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets”. International Journal of Economics and Financial Issues 4, no. 2 (June 2014): 411-26.
EndNote Corbet S, Twomey C (June 1, 2014) Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets. International Journal of Economics and Financial Issues 4 2 411–426.
IEEE S. Corbet and C. Twomey, “Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets”, IJEFI, vol. 4, no. 2, pp. 411–426, 2014.
ISNAD Corbet, Shaen - Twomey, Cian. “Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets”. International Journal of Economics and Financial Issues 4/2 (June 2014), 411-426.
JAMA Corbet S, Twomey C. Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets. IJEFI. 2014;4:411–426.
MLA Corbet, Shaen and Cian Twomey. “Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets”. International Journal of Economics and Financial Issues, vol. 4, no. 2, 2014, pp. 411-26.
Vancouver Corbet S, Twomey C. Quantifying the Effects of the Inclusion and Segregation of Contracts for Difference in Australian Equity Markets. IJEFI. 2014;4(2):411-26.