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Index Futures Markets (index + future_market)
Selected AbstractsIntradaily Patterns in the Korean Index Futures MarketASIAN ECONOMIC JOURNAL, Issue 2 2002Laurence Copeland This paper extends the research on intraday patterns in stock and futures exchanges into the Korean market. Similar patterns to those found previously in the heavily investigated Western markets are observed, despite the differing microstructures, institutional framework and time zones between East and West. In addition, we investigate the effect of the Asian financial crisis on intraday variables. In the Korean market, both volume and volatility were found to be consistently higher at the start of the trading day during the crisis, presumably due to a rapid reaction to overnight news. [source] Hedge Ratio Stability and Hedging Effectiveness of Time-Varying Hedge Ratios in Volatile Index Futures Markets: Evidence from the Asian Financial Crisis,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 5 2010Janchung Wang C10; G13; G15 Abstract Hedge ratio stability is especially important because hedgers are likely to use the estimate of historical hedge ratios to hedge future positions of their portfolios. One main purpose of the present study is to examine hedge ratio stability during the Asian financial crisis and post-crisis, periods characterized by high price volatility, using the Nikkei 225, Hang Seng, and KOSPI 200 index futures contracts. Empirical results from the Hang Seng and the KOSPI 200 futures markets indicate that during the two periods of high price volatility, hedge ratios appeared to be unstable. Additionally, both in-sample and out-of-sample evidences indicate that, for hedging effectiveness, the time-varying hedge ratios clearly outperform the constant hedge ratios for the Hang Seng and the KOSPI 200 index futures, consistent with the findings of hedge ratio instability. The comparison results of different time-varying hedge ratios support the conclusion that the bivariate error correction generalized autoregressive conditional heteroskedastic (1,1) model enhances hedging effectiveness compared to other time-varying hedge ratios. Finally, this study examines the impact of hedge duration on hedging effectiveness and hedge ratios. The empirical results indicate that hedging effectiveness improves with increasing hedge duration. [source] Trading activity in stock index futures markets: The evidence of emerging marketsTHE JOURNAL OF FUTURES MARKETS, Issue 10 2002Yu Chuan Huang This study investigates the trading activity of the Taiwan Futures Exchange (TAIFEX) and Singapore Exchange Derivatives Trading Limited (SGX-DT) Taiwan Stock Index Futures markets by analyzing the intraday patterns of volume and volatility. In addition, the market closure theory, which may explain such patterns, is examined. Overall, the trading pattern appears to be U-shaped for the TAIFEX futures and U+W-shaped for the SGX-DT. For the SGX-DT futures, volatility follows the same pattern as that of the number of price changes. For the TAIFEX futures, however, after the peak at the close of the spot market, the volatility in the TAIFEX futures drops consistently until the end of the day while volatility in the SGX-DT still reaches a smaller peak at the close of the futures market. In addition, a visual inspection of the intraday patterns of these two markets shows that the market closure theory can effectively explain the intraday patterns of these two markets. The empirical results support the market closure theory in that liquidity demand from traders rebalancing their portfolios before and after market closures creates larger volume and volatility at both the open and close. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:983,1003, 2002 [source] A model of price discovery and market design: Theory and empirical evidenceTHE JOURNAL OF FUTURES MARKETS, Issue 12 2004Michael T. ChngArticle first published online: 11 OCT 200 Price discovery is an essential function performed by derivative markets. For a derivative exchange, its markets' ability to incorporate information into prices to "derive" the underlying asset's value is a key objective of market design. The J. Hasbrouck (1991a) model is applied to examine the design and price discovery of a futures market. First, the model is extended to consider a comprehensive dynamic interaction between the price-size coordinates of orders and trades. Second, floor and screen tick data from LIFFE's FTSE 100 index futures market is used to estimate the two models. The significance of order size variables in the extended model suggests that order flow transparency, which is supported by an electronic trading platform, improves price discovery. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:1107,1146, 2004 [source] The predictive value of temporally disaggregated volatility: evidence from index futures marketsJOURNAL OF FORECASTING, Issue 8 2008Nicholas Taylor Abstract This paper examines the benefits to forecasters of decomposing close-to-close return volatility into close-to-open (nighttime) and open-to-close (daytime) return volatility. Specifically, we consider whether close-to-close volatility forecasts based on the former type of (temporally aggregated) data are less accurate than corresponding forecasts based on the latter (temporally disaggregated) data. Results obtained from seven different US index futures markets reveal that significant increases in forecast accuracy are possible when using temporally disaggregated volatility data. This result is primarily driven by the fact that forecasts based on such data can be updated as more information becomes available (e.g., information flow from the preceding close-to-open/nighttime trading session). Finally, we demonstrate that the main findings of this paper are robust to the index futures market considered, the way in which return volatility is constructed, and the method used to assess forecast accuracy. Copyright © 2008 John Wiley & Sons, Ltd. [source] INFORMATION AND NOISE IN FINANCIAL MARKETS: EVIDENCE FROM THE E-MINI INDEX FUTURESTHE JOURNAL OF FINANCIAL RESEARCH, Issue 3 2008Alexander Kurov Abstract I examine the informational contributions and effects on transitory volatility of trades initiated by different types of traders in three actively traded index futures markets. The results show that trades initiated by exchange member firms account for more than 60% of price discovery during the trading day. These institutional trades appear to be more informative than trades of individual exchange members or off-exchange traders. I also find that off-exchange traders introduce more noise into the prices than do exchange members. My findings provide new evidence on the role of different types of traders in the price formation process. [source] Tick size reduction, execution costs, and informational efficiency in the regular and E-mini Nasdaq-100 index futures marketsTHE JOURNAL OF FUTURES MARKETS, Issue 9 2008Alexander Kurov On April 2, 2006, the Chicago Mercantile Exchange reduced the minimum tick size of the floor-traded and E-mini Nasdaq-100 futures from 0.5 to 0.25 index points. This study examines the effect of this change in the contract design on execution costs, informational efficiency, and price discovery. The results show a significant reduction in the effective spreads in both of the contract markets but especially in the electronically traded E-mini futures. The paper also finds that the tick size reduction has improved price discovery and informational efficiency in the E-mini futures market. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:871,888, 2008 [source] Price clustering in E-mini and floor-traded index futuresTHE JOURNAL OF FUTURES MARKETS, Issue 3 2006Huimin Chung This article sets out to investigate price clustering in both the open-outcry (floor-traded) and electronically traded (E-mini) index futures markets of the DJIA, S&P 500, and NASDAQ-100 indices. The results show that although price clustering is ubiquitous in both the floor-traded and E-mini index futures markets, it nevertheless tends to be higher for open-outcry index futures, with the clustering in floor-traded NASDAQ-100 index futures demonstrating the highest level (97%) at zero digits. A significant increase was also found in price clustering in floor-traded index futures after the introduction of E-mini futures trading. The results tend to suggest that those trading mechanisms that involve higher levels of human participation, such as the open-outcry markets, may well lead to increased incidences of price clustering. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26: 269,295, 2006 [source] Information transmission in electronic versus open-outcry trading systems: An analysis of U.S. equity index futures marketsTHE JOURNAL OF FUTURES MARKETS, Issue 7 2005Aysegul Ates In this article the intraday price discovery process between regular index futures (floor trading) and E-mini index futures (electronic trading) in the S&P 500 and Nasdaq 100 index futures markets is examined, using intraday data from the introduction of the E-mini index futures to 2001. Using both information shares (Hasbrouck, J., 1995) and common long-memory factor weights (Gonzalo, J., & Granger, C. W. J., 1995) techniques, we find that both E-mini index futures and regular index futures contribute to the price discovery process. However, since September 1998, the contribution made by E-mini index futures has been greater than that provided by regular index futures. Based on regression analysis, we have also found direct empirical evidence to support the hypothesis that the joint effects of operational efficiency and relative liquidity determine the greater contribution made towards price discovery by electronic trading relative to open-outcry trading over time. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25: 679,715, 2005 [source] Intradaily periodicity and volatility spillovers between international stock index futures marketsTHE JOURNAL OF FUTURES MARKETS, Issue 6 2005Chunchi Wu This paper examines short-run information transmission between the U.S. and U.K. markets using the S&P 500 and FTSE 100 index futures. Ultrahighfrequency futures data are employed,which have a number of advantages over the low-frequency spot data commonly used in previous studies,in establishing that volatility spillovers are in fact bidirectional. The generalized autoregressive conditionally heteroskedastic model (GARCH) is employed to estimate the mean and volatility spillovers of intraday returns. A Fourier flexible function is utilized to filter the intradaily periodic patterns that induce serial correlation in return volatility. It was found that estimates of volatility persistence and speed of information transmission are seriously affected by intradaily periodicity. The bias in parameter estimation is removed by filtering out the intradaily periodic component of the transaction data. Contrary to previous findings, there is evidence of spillovers in volatility between the U.S. and U.K. markets. Results indicate that the volatility of the U.S. market is affected by the most recent volatility surprise in the U.K. market. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:553,585, 2005 [source] A Markov regime switching approach for hedging stock indicesTHE JOURNAL OF FUTURES MARKETS, Issue 7 2004Amir Alizadeh In this paper we describe a new approach for determining time-varying minimum variance hedge ratio in stock index futures markets by using Markov Regime Switching (MRS) models. The rationale behind the use of these models stems from the fact that the dynamic relationship between spot and futures returns may be characterized by regime shifts, which, in turn, suggests that by allowing the hedge ratio to be dependent upon the "state of the market," one may obtain more efficient hedge ratios and hence, superior hedging performance compared to other methods in the literature. The performance of the MRS hedge ratios is compared to that of alternative models such as GARCH, Error Correction and OLS in the FTSE 100 and S&P 500 markets. In and out-of-sample tests indicate that MRS hedge ratios outperform the other models in reducing portfolio risk in the FTSE 100 market. In the S&P 500 market the MRS model outperforms the other hedging strategies only within sample. Overall, the results indicate that by using MRS models market agents may be able to increase the performance of their hedges, measured in terms of variance reduction and increase in their utility. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:649,674, 2004 [source] Trading activity in stock index futures markets: The evidence of emerging marketsTHE JOURNAL OF FUTURES MARKETS, Issue 10 2002Yu Chuan Huang This study investigates the trading activity of the Taiwan Futures Exchange (TAIFEX) and Singapore Exchange Derivatives Trading Limited (SGX-DT) Taiwan Stock Index Futures markets by analyzing the intraday patterns of volume and volatility. In addition, the market closure theory, which may explain such patterns, is examined. Overall, the trading pattern appears to be U-shaped for the TAIFEX futures and U+W-shaped for the SGX-DT. For the SGX-DT futures, volatility follows the same pattern as that of the number of price changes. For the TAIFEX futures, however, after the peak at the close of the spot market, the volatility in the TAIFEX futures drops consistently until the end of the day while volatility in the SGX-DT still reaches a smaller peak at the close of the futures market. In addition, a visual inspection of the intraday patterns of these two markets shows that the market closure theory can effectively explain the intraday patterns of these two markets. The empirical results support the market closure theory in that liquidity demand from traders rebalancing their portfolios before and after market closures creates larger volume and volatility at both the open and close. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:983,1003, 2002 [source] | ||||||||||||||||||||||