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An Investigate on Information Transmission of Nearby-Month Taiwan Stock Index Futures during Trading, Nontrading, and between Trading and Nontrading Period: Price Discovery and Content of Price Volatility

Journal of Financial Studies

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Title An Investigate on Information Transmission of Nearby-Month Taiwan Stock Index Futures during Trading, Nontrading, and between Trading and Nontrading Period: Price Discovery and Content of Price Volatility
 
Creator Chui-Chun Tsai
Tsun-Siou Lee
 
Description This paper applies VECM-bi-EGARCH(1,1) model to investigate the information transmission of nearby-month Taiwan Stock Index Futures. We use the return lead/lag relationship between futures and spots to explain price discovery of futures; and use the return persistent process dominate of volatility over horizon time, asymmetric volatility and volatility spillover to explain the content of futures price. However, the volatility of return is heterogeneous when return is garthered by trading, nontrading, and between trading and nontrading period. Thus we examine and garther the return data from three period. These include 5 mintues and intraday data garthered during trading period; overnight data garthered by nontrading period; open-to-open and close-to-close data garthered between trading and nontrading period. Two major findings obtain regarding the price discovery and content of price volatility: (1) Taiwan stock index futures could creat more price discovery function versus spots on overnight data. The price lead effects would be statistic siganificant. (2) Taiwan stock index futures presents more persistent volatility over horizon time when five minute data, intraday and overnight data are tested. Negative and unexpected shocks make Taiwan stock index futures present asymmetric volatility when all patterns of return are tested. Compare with Taiwan stock index futures and spots, Taiwan stock index futures would be with more volatility spillover. Negative shocks on futures markets result in higher volatility in spots market when 5 minute data is tested; unexpected shocks on the futures market induce higher volatility in the spots market, and vice versa when all patterns of return are tested. The content of futures price volatility would be statistic siganificant when 5 minutes data is test. Therefore, by delicacy observation, we cloud aware the price discovery and content of futures price volatility more clarly.

Key words: Price discovery, content of price volatility, trading period, nontrading period, VECM- bi-EGARCH.
 
Publisher Journal of Financial Studies
財務金èžå­¸åˆŠ
 
Date 2011-06-10
 
Type —
 
Format application/pdf
 
Identifier http://www.jfs.org.tw/index.php/jfs/article/view/2011158
 
Source Journal of Financial Studies; Vol 12, No 1 (2004); 53
財務金èžå­¸åˆŠ; Vol 12, No 1 (2004); 53
 
Language —