City Research Online

Abstract

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.

Publication Type:	Article
Additional Information:	This is the peer reviewed version of the following article: Phylaktis, K. & Aristidou, A. (2013). Margin Changes and Futures Trading Activity: a New Approach. European Financial Management, 19(1), pp. 45-71, which has been published in final form at https://dx.doi.org/10.1111/j.1468-036X.2010.00565.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Publisher Keywords:	margin requirements; financial market volatility-volume; Athens Stock Exchange
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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