Expiration day effects: The case of Hong Kong

Regulators around the world often express concerns about the high volatility of stock markets due to index derivative expirations. Earlier studies of expiration day effects have found large volume effects, abnormal return volatility, and price effects during the last hour of trading on expiration days when the settlement is based on the closing price. This article examines the impact of the expiration of Hang Seng Index (HSI) derivatives on the underlying cash market in Hong Kong for the period from 1990 to 1999. The HSI derivative market is different from most other markets in the sense that the settlement price is computed by taking the average of 5‐minute quotations of the HSI on the last trading day, thus providing an alternative setting for testing expiration day effects. Our empirical findings indicate that expiration days in Hong Kong may be associated with a negative price effect and some return volatility on the underlying stock market, but there is no evidence of abnormal trading volume on the expiration day, or price reversal after expiration. Thus, the existence of expiration day effects cannot be confirmed in the Hong Kong market. [JEL classification: G13; G14; G15]. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:67–86, 2003     

Expiration‐day effects—An Asian twist

This study examines the intraday trading activities of index stocks on the common expiration day of index derivatives. In Hong Kong, index futures and index options use an Asian‐style settlement procedure. All contracts are settled against the estimated average settlement price, an arithmetic average of the underlying cash index taken every five minutes on the expiration day. Trading volume and total trade count on the expiration day are both found to be higher than normal. Most important, trading intensifies in terms of volume and frequency close to the five‐minute time marks. The study does not find significant price reversal and price compression patterns. Although significant order imbalance pattern is found on some expiration days, the results show no association between order imbalance pattern and the next‐day return. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 28:430–450, 2009     

市场竞争性和我国的医疗体制改革——经济学视角下的医疗体制改革模式

市场的竞争性不仅取决于市场结构,还取决于价格信息在消费者之间的传播速度。由于医疗服务的价格信息在患者之间的传播是一个缓慢的时间过程,所以医疗服务市场看似有竞争而实际上竞争程度远比一般商品和服务市场低得多。在说明医疗服务市场的高价格水平形成机制的同时,指出政府只要能够改变医疗服务价格信息的传播机制,就能够建立一个以市场机制为基础的高效率的医疗卫生体制。     

我国货币政策与沪深股市的协整关系研究

运用协整检验、误差修正模型、格兰杰(GRANGER)因果检验等计量经济学方法,对我国货币政策如何影响沪深股市这一问题做了系统而深入的研究。通过分析,得出了如下结论:STV、M0、M1、M2之间存在着两个协整关系;RSTV、RM0、RM1、RM2之间存在着三个协整关系。在货币供应量与沪深股市市价总值之间,是货币供应量的变化影响沪深股市市价总值,而不是沪深股市市价总值影响货币供应量的变化。这些结论对投资者尤其是机构投资者来讲,具有一定的参考价值。同时,对我国货币政策当局调控股市也有一定的借鉴意义。     

Price discovery in commodity derivatives: Speculation or hedging?

We investigate whether commodity futures or options markets play a more important role in the price discovery process in the six most actively traded markets: crude oil, natural gas, gold, silver, corn, and soybeans. Using new information leadership techniques, we report new evidence and report that both markets make a meaningful contribution to price discovery in recent times; however, on average, options lead futures in reflecting new information for a majority of these commodities. We find that increased speculation, rather than hedging activity, in commodity derivatives is a key determinant of price discovery in the options markets.     

Can the Indicative Price System Mitigate Expiration‐Day Effects?

We investigate whether the indicative price system, introduced in the Korean derivatives market on July 1, 2003, has helped mitigate the options and futures expiration‐day effects. Prior to introduction of this system, we find evidence of high trading volume and significant price reversals during the first half hour of trading for the day immediately following the expiration day. These effects decline significantly after July 1, 2003. Our evidence suggests that the indicative price system can mitigate the expiration‐day effects.     

分业经营下资本市场与货币市场之间的联结分析

本文首先理论上分析了货币市场和资本市场在金融自由化和分业条件下的联结机制,接着阐达我国分业条件下两个市场或明、或暗的连接现状,最后用误差修正方法实证分析我国分业经营下资本市场与货币市场之间的联结行为,指出:两个市场无论明的、暗的联结渠道都是通畅的,但同业拆借利率作为货币市场价格传导信号存在扭曲情况,居民和企业投资连接两个市场可能蕴含一定风险。文章最后提出了相关政策建议。     

The trilogy of China cotton markets: The lead–lag relationship among spot,forward, and futures markets

China is a leading participant in the world cotton market. China’s distinctive regulatory structure and procedures and business environment provide an opportunity to explore some unique market dynamics. This study investigates the interrelationship among the spot, futures, and forward cotton markets in China over a period of a major policy change: A temporary State reserve program for cotton that was established in 2011 and ended in 2014. This government intervention significantly distorted the way farmers, manufacturers, and speculators interacted and was not sustainable. Overall, our results support futures market’s dominant role in the price discovery process.     

增加证券市场透明度与改善市场质量

根据市场微观结构理论 ,证券市场透明度变化显著影响市场效率与投资者福利。近年来 ,基于增加市场透明度将促进市场效率及公平的信念 ,许多证券监管当局试图建立高度透明甚至完全透明的证券市场。然而 ,本文的分析表明 ,增加透明度并不一定改善市场质量 ,其对市场效率与投资者福利的影响十分复杂 ,监管当局应当根据市场特征建立适度透明而不是过度透明的信息披露制度 ,同时需要采取措施规制基于强制信息披露的市场操纵行为。本文最后对如何完善国内证券市场大宗交易制度提出了政策建议。     

Trading protocols and price discovery: Implicit transaction costs in Indian single stock futures

We show how trading protocols impede the price discovery process in single stock futures as implicit trade costs outweigh explicit costs. Despite the trade volume dominance, trade costs advantage and leverage efficiency in futures markets, single stock futures account for only 35% of the price discovery vis-á-vis the spot market. Futures market's informational efficiency is adversely affected by market frictions in the form of marketwide position limits, minimum contract values, and margin requirements.     

Futures and options expiration‐day effects: The Indian evidence

This study examines the effect of expiration of options and futures on price, volatility, and volume of the underlying shares. The values of these variables 1 day prior to expiration, on the day of expiration, and 1 day subsequent to expiration are compared with those 1 and 2 weeks before and after the corresponding day with the use of the Wilcoxon matched‐pairs signed‐ranks test. The underlying share prices tend to get marginally depressed a day prior to expiration and to strengthen significantly a day after the expiration. The rate of increase of returns on the day after the expiration is abnormally high. An abnormally high volume is also observed on the expiration day; it starts building up a day prior to expiration and continues into the following day for shares with relatively high derivative volumes. These effects can be largely ascribed to arbitrage activities and the restriction on short sales in the Indian cash market. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:1045–1065, 2005     

Grey Power: An Empirical Investigation of the Impact of Parallel Imports on Market Prices

The persistence of price discrimination across international markets with falling costs of unofficial importing is both paradox and policy concern. E-commerce facilitates a “grey” market in parallel imports, particularly for high-value goods such as electronics. This paper explores the impact of unofficial imports on price using a panel of product markets mediated via an Internet shopbot. It finds the presence of an import model lowers prices across the market. However, unlike the refurbished model it is not simply an inferior substitute. The import price discount increases over the model life cycle, suggesting that model-specific preferences fall as each model ages.

我国大豆市场价格整合分析

主要研究国内大豆市场之间、国内与国际大豆市场之间的价格影响与作用机制。本文分析了各市场价格变化之间的因果关系,各市场之间相对价格差异调整的速度。并从计量经济学的模型检验了变量价格序列数据之间是否是协整的关系及确认了它们之间格兰杰意义上的因果关系走向。     

Market openness and market quality in gold markets

This paper studies the impact of market openness on market quality in gold markets, by investigating the openness event that occurred when the Shanghai Gold Exchange (SGE) launched an international board (SGEI) for foreign investors in China. Investors prefer to trade on the SGE than the SGEI, probably due to the SGE’s higher liquidity. In addition, using the New York Mercantile Exchange (COMEX) gold futures as the benchmark, we show the SGE experiences a significant increase in liquidity without a concomitant increase in volatility. Moreover, the SGE’s contribution to international gold price discovery increases after the openness event.     

Speculative behavior of foreign exchange rates during the current float

The current regime of floating exchange rates has been characterized by a number of informed observers as economically unsatisfactory. Use of terms such as “overshooting”, “bandwagon effects”, “destabilizing”, and “insufficient speculation” reflects serious misgivings on the part of many toward the long-run viability of a floating, rather than a fixed or semi-fixed, rate regime. Using fairly standard procedures, the authors have attempted to determine the extent to which the foreign exchange market exhibits the adverse features noted above. The authors conclude that by and large foreign exchange markets have not performed particularly poorly. The foreign exchange markets seem to be efficient at least in the weak form sense. Past exchange rate changes are not useful in predicting future exchange rate changes. This empirical finding contrasts sharply with the view that the markets “overshoot”, or that there are “bandwagon effects”, or that the amount of price stabilizing speculation is inadequate.     

The Chinese Stock Markets on Trial: The Fat Finger Accident of Everbright Securities

Everbright Securities Ltd. erroneously submitted huge quantities of buy orders on SSE180 constituent stocks from 11:05 through 11:07 on 16 August 2013. This fat finger accident had a pronounced impact on the Chinese stock markets. This paper uses the accident to study market quality and investors’ responses. We show that the Chinese stock markets were robust enough to stand the trial, exhibiting deep depths and strong resiliency. However, the markets performed poorly in terms of aggregating information because there were large price swings after the erroneous orders were executed. Moreover, investors quickly change their beliefs as to the reasons to the dramatic price jumps, consistent with information cascade theory.     

专业市场价格指数编制理论初探

专业市场在商品经济中的地位越来越重要,专业市场价格指数作为一种反映市场价格变动情况的指标工具,其作用日渐被人们所认可,价格指数的编制工作越来越受到重视。通过对当前我国的专业市场及其价格指数编制理论的探述,为指数编制实践和运用提供支持。     

A hedging deficiency in eurodollar futures

The eurodollar futures contract of the Chicago Mercantile Exchange is arguably the most successful of all futures contracts. The contract is structured such that its price does not converge to the price of the underlying eurodollar time deposit. Ignoring the daily settlement, one typically assumes that a eurodollar futures contract perfectly hedges an anticipated loan pegged to LIBOR, provided the loan rate is set at the eurodollar expiration. This article demonstrates that this hedge is not perfect, leaving a risk empirically estimated at four basis points, a seemingly small amount but considerably larger than the bid–ask spread on the futures. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:189–207, 2006     

Expiration‐day effects on individual stocks and the overall market: Evidence from Taiwan

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     

Bargaining procedures that induce honesty

When bargaining between two actors over an object is modeled as a noncooperative game of incomplete information, equilibrium bids generally involve misrepresentation of the players' true values. But the bargainers' payoffs can be modified so that truthfully revealing one's reservation price is a dominant strategy. While such modifications define bargaining procedures that induce honesty in bidding and thereby avoid an inefficient outcome, these procedures may be vulnerable to other difficulties. The procedures analyzed are the following:Bonus Procedure: the players share a bonus equal to the overlap in their bids, whenever a settlement is feasible;Penalty Procedure: the settlement is reduced (usually probabilistically) to a level proportionate to the overlap of the bids, whenever a settlement is feasible;Appraisal Procedure: there is a settlement when, and only when, an independent appraisal is above the seller's and below the buyer's bid. The appraisal value is then the exchange price;Expansive Appraisal Procedure: there is a settlement at the appraised value, unless it is unfavorable toboth the buyer and the seller. These honesty-inducing procedures are evaluated according to several criteria, namely, efficiency in achieving feasible trades, ability to be self-financing (rather than requiring a subsidy), vulnerability to collusion, and compatibility with each player's individual interests. Besides these theoretical assessments, practical considerations, including the need for a settlement, the means of implementation, and so on, are discussed.