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Tick sizes and relative rates of price discovery in stock, futures, and options markets: Evidence from the Taiwan stock exchange
Author(s) -
Chen YuLun,
Gau YinFeng
Publication year - 2009
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.20319
Subject(s) - price discovery , stock exchange , tick size , financial economics , stock market index , economics , stock index futures , index (typography) , futures contract , stock (firearms) , capitalization weighted index , market maker , cost price , stock market , monetary economics , business , finance , geography , computer science , context (archaeology) , archaeology , world wide web
Abstract This study examines the competition in price discovery among stock index, index futures, and index options in Taiwan. The price‐discovery ability of the Taiwan Top 50 Tracker Fund, an exchange‐traded fund based on the Taiwan 50 index is examined. The authors find that, after the minimum tick size in the stock market decreases, the bid–ask spreads of the component stocks of the stock index and the Taiwan Top 50 Tracker Fund get lower, and the contribution of the spot market to price discovery increases. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:74–93, 2009