Evidence of information transmission across currency futures markets using frequency domain tests |
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| Institution: | 1. School of Business and Economics, Department of Accounting and Finance, Thompson Rivers University, 900 McGill Road, Kamloops, BC V2C 5N3, Canada;2. College of Business Administration, Department of Finance, Kent State University, P.O. Box 5190, Kent, OH 44242-0001, USA;3. School of Business and Economics, Department of Economics and Finance, Lynchburg College, 1501 Lakeside Drive, Lynchburg, VA 24551, USA;1. Department of Mathematical Sciences, Xi’an Jiaotong-Liverpool University, Ren’ai Road 111, Suzhou 215123, China;2. Center for Economics and Econometrics, Bogazici University, Istanbul, Turkey;1. European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany;2. Narodowy Bank Polski, Financial Stability Department, ul. Swietokrzyska 11/21, 00-919 Warsaw, Poland;3. Warsaw School of Economics, Institute of Econometrics, ul. Madalińskiego 6/8, 02-513 Warsaw, Poland |
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| Abstract: | In this article, I examine the returns and volatility spillovers in the currency futures market incorporating the recently developed frequency domain tests. Such analysis allows differentiating between permanent (long-run) and transitory (short-run) linkages among the currency futures markets by investigating the causality dynamics at low and high frequencies respectively. I detect significant informational linkages between USD, EUR, GBP and JPY futures contracts in the Indian currency futures market. Evidence of innovations from USD futures market to other markets is the most significant for returns spillover and for volatility spillover, EUR is found to be the most significant compared to other currency futures contracts. The results would have implications for the market participants and policymakers. |
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| Keywords: | Currency futures Information transmission Spillover Frequency domain |
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