Price Discovery of Index Futures across Markets

30 Pages Posted: 19 Sep 2016

See all articles by Jerry Cao

Jerry Cao

Independent

Xiaoming Wang

Shanghai University of Finance and Economics

Nelson Yap

Independent

Sili Zhou

Fanhai International School of Finance and School of Economics, Fudan University

Date Written: May 6, 2016

Abstract

The trading of foreign index futures by the Singapore Exchange (SGX) offers an ideal opportunity to study price discovery and information of trading across different markets. We examine four popular indices - Nikkei 225 Index, MSCI Taiwan Index, CNX Nifty Index and the FTSE China A50 Index traded in SGX and compare them with their home market trading. In contrary to standard theory and evidence, we show that smaller bid-ask spread, lower minimum lots and cheaper transaction cost do not necessary improve information efficiency. These results may shed some light on the usefulness of the role of an international financial centre on the price discovery of foreign indices.

Suggested Citation

Cao, Jerry and Wang, Xiaoming and Yap, Nelson and Zhou, Sili, Price Discovery of Index Futures across Markets (May 6, 2016). Available at SSRN: https://ssrn.com/abstract=2840067 or http://dx.doi.org/10.2139/ssrn.2840067

Jerry Cao

Independent

No Address Available

Xiaoming Wang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Nelson Yap

Independent

No Address Available

Sili Zhou (Contact Author)

Fanhai International School of Finance and School of Economics, Fudan University ( email )

Room 520, Building 5, 220 Handan Road
Shanghai
China

HOME PAGE: http://siliz.weebly.com/

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