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Arbitrage trading and price discovery of the regular and mini Taiwan stock index futures
Author(s) -
Chen YuLun,
Lee YenHsien,
Chou Robin K.,
Chang YaKai
Publication year - 2021
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.22192
Subject(s) - price discovery , futures contract , arbitrage , financial economics , economics , margin (machine learning) , index (typography) , stock index futures , portfolio , forward market , business , stock market index , stock market , computer science , geography , machine learning , world wide web , context (archaeology) , archaeology
We investigate the contributions of the Taiwan regular and mini index futures to price discovery. We find that the regular futures provide more price discovery, which is inconsistent with the findings for the US futures markets. This dominance of regular futures became relatively weaker after the introduction of the standard portfolio analysis of the risk margin system because of more arbitrage trades mainly executed by institutional investors. We show the effect of the introduction of an integrated margin system on the price‐discovery processes and efficiencies for futures with the same underlying asset but different contract sizes.