An Empirical Study on Volatility Spillover Effect among KOSPI200, Futures, ETFs Markets

Abstract

In this study we compared the effectiveness of different ETFs. For this purpose, we analyzed the volatility spillover effect (process) among KOSPI200, KOSPI200 futures and KOSPI200 ETFs such as KODEX200, KOSEF200, KINDEX200, TIGER200 using multi-variate GARCH model. The sample was generated from high frequency data set over the period from 05/24/2009 to 12/29/2011 (669 days). The volatility spillover effect was examined at 1, 5, 10, 30 minute' intervals for each market and the main results are as follows; First, KODEX200 has the highest correlations with KOSPI200 and KOSPI200 futures in four ETFs. Second, all ETFs have a cointegrated relationship with its underlying asset KOSPI200 as KOSPI200 and KOSPI200 futures do. Third, in the daily data the volatility spillover among ETFs, KOPSI200 and KOSPI200 futures was investigated in part but it was not consistent. The fourth, according to the result derived from high-frequency data analysis the volatility spillover effect from KODEX200 to KOSPI200 (KOSPI200 futures) is bigger than that from KOSPI200 (KOSPI200 futures) to KODEX200 while other ETFs are not. The overall results indicate that KODEX200 which is the biggest ETF in volume performs very important roles in finding the price of underlying asset and further researches can be expected.