Template-type: ReDIF-Paper 1.0
Author-Name: Chia-Lin Chang
Author-Email: changchialin@nchu.edu.tw
Author-Workplace-Name: Department of Applied Economics Department of Finance National Chung Hsing University Taichung, Taiwan.
Author-Name: Michael McAleer
Author-Workplace-Name:
 Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute, Erasmus 
	School of Economics Erasmus University Rotterdam and Tinbergen Institute, The Netherlands and Department of Quantitative 
	Economics Complutense University of Madrid, Spain.
Author-Name: Chien-Hsun Wang
Author-Workplace-Name: Institute of Statistics National Tsing Hua University, Taiwan.

Title: An econometric analysis of ETF and ETF futures in financial and energy markets using generated regressors
Abstract: It is well known that that there is an intrinsic link between the financial and energy sectors, which can be analyzed 
	through their spillover effects, which are measures of how the shocks to returns in different assets affect each other’s 
	subsequent volatility in both spot and futures markets. Financial derivatives, which are not only highly representative of 
	the underlying indices but can also be traded on both the spot and futures markets, include Exchange Traded Funds (ETFs), 
	which is a tradable spot index whose aim is to replicate the return of an underlying benchmark index. When ETF futures are 
	not available to examine spillover effects, “generated regressors” may be used to construct both Financial ETF futures and 
	Energy ETF futures. The purpose of the paper is to investigate the covolatility spillovers within and across the US energy 
	and financial sectors in both spot and futures markets, by using “generated regressors” and a multivariate conditional 
	volatility model, namely Diagonal BEKK. The daily data used are from 1998/12/23 to 2016/4/22. The data set is analyzed in 
	its entirety, and also subdivided into three subset time periods. The empirical results show there is a significant 
	relationship between the Financial ETF and Energy ETF in the spot and futures markets. Therefore, financial and energy 
	ETFs are suitable for constructing a financial portfolio from an optimal risk management perspective, and also for 
	dynamic hedging purposes.
Classification-JEL: C58, G13, G23, G31, Q41
Keywords: Exchange traded funds, Financial and energy sectors, Co-volatility spillovers, Spot and futures prices, Generated 
	regressors, Diagonal BEKK.
Length: 59 pages 
Creation-Date: 2016-06
Number: 2016-12
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1612.txt
File-URL: https://eprints.ucm.es/id/eprint/38283/1/1612.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1612