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Trading activity in stock index futures markets: The evidence of emerging markets
Author(s) -
Huang Yu Chuan
Publication year - 2002
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.10040
Subject(s) - futures contract , volatility (finance) , futures market , financial economics , market liquidity , spot market , economics , algorithmic trading , open outcry , stock index futures , stock exchange , stock market , stock market index , monetary economics , alternative trading system , finance , geography , engineering , electricity , electrical engineering , context (archaeology) , archaeology
This study investigates the trading activity of the Taiwan Futures Exchange (TAIFEX) and SingaporeExchange Derivatives Trading Limited (SGX‐DT) Taiwan Stock Index Futures markets by analyzing theintraday patterns of volume and volatility. In addition, the market closure theory, which may explain suchpatterns, is examined. Overall, the trading pattern appears to be U‐shaped for the TAIFEX futures andU+W‐shaped for the SGX‐DT. For the SGX‐DT futures, volatility follows the same patternas that of the number of price changes. For the TAIFEX futures, however, after the peak at the close of the spotmarket, the volatility in the TAIFEX futures drops consistently until the end of the day while volatility in theSGX‐DT still reaches a smaller peak at the close of the futures market. In addition, a visual inspection ofthe intraday patterns of these two markets shows that the market closure theory can effectively explain theintraday patterns of these two markets. The empirical results support the market closure theory in that liquiditydemand from traders rebalancing their portfolios before and after market closures creates larger volume andvolatility at both the open and close. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:983–1003,2002