Do financially innovative futures matter?

Abstract

Regarding the increasingly important role of financial services sectors like futures exchanges previous research has been unable to determine what types of futures contracts contribute to higher trading volumes and the likely magnitudes of their contributions. Thus, to investigate the sources of higher trading volumes in futures exchanges, this study, following the perspectives of diversification relatedness and core competence, adopts a multi-component concept and proposes that different futures exchanges have different types of futures contracts that work best. This study employs the Commodity Research Bureau's Yearbook to examine this issue. A stepwise regression model is fitted to the data set, and findings indicate that financially innovative futures dominate trading volume while traditional agricultural futures have little impact. Managerial and theoretical implications are discussed.