Futures Trading Reduces Stock Market Volatility, Speeds Up Information Flow
The article examines how trading futures affects stock markets, focusing on changes in volatility and liquidity. By analyzing data using a specific mathematical model, the researchers found that introducing futures trading can reduce volatility in the stock market and speed up how quickly market information affects stock prices. However, volatility persistence increased after futures trading began. This suggests that the way information is processed and reflected in stock prices differs before and after futures trading is introduced.