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Expiration‐day effects on individual stocks and the overall market: Evidence from Taiwan
Author(s) -
Hsieh WenLiang Gideon
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.20391
Subject(s) - volatility (finance) , expiration , economics , futures contract , stock index futures , index (typography) , financial economics , expiration date , stock (firearms) , monetary economics , futures market , stock market index , stock market , econometrics , medicine , chemistry , geography , context (archaeology) , food science , world wide web , computer science , respiratory system , archaeology
On expiration days of the MSCI‐TW index futures, the Taiwan spot market is associated with abnormally large volume and high index volatility, along with mild index reversal. The effects concentrate only in the last five minutes of expiration days and appear to be strengthened by the adoption a call auction closing procedure by the Taiwan Stock Exchange. Individual index stocks show high volatility and strong tendency of price reversal, with large‐ and small‐cap stocks being affected more than the medium‐sized stocks. The highest‐weighted stocks exhibit excessive volume and volatility, which is disproportionate to the impact on all other index stocks, indicating that the expiration‐day effects may have been amplified by the attempt of price manipulation using large‐cap stocks. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:920–945, 2009