Maturity effects in futures contracts on the SAFEX market

Abstract

This article examines maturity effects for futures contracts listed on the South African Futures Exchange (SAFEX). Three classes of derivative contracts are examined; agricultural, metals and energy futures. Estimation of the Samuelson effect is by ordinary least squares (OLS) approach using the volatility estimator in Garman and Klass (1980), Parkinson (1980) and Serletis (1992). The analysis simultaneously tests for the Samuelson effect while establishing significance of traded volume, change in open interest and bid-ask spread on intraday volatility. Multicollinearity and seasonality are incorporated to examine if maturity effects remain in the contracts. Findings are that only wheat supports maturity effects. However, white maize and silver volatility decline as time-to-maturity diminishes. The implications of the results for traders and market participants are discussed.