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The impacts of institutional and individual investors on the price discovery in stock index futures market: Evidence from China

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  • Xu, Feng
  • Wan, Difang

Abstract

Using both information shares and common factor component weight approaches, we calculate the price discovery between the CSI 300 index futures market and the Chinese A-share market. We find that the futures market contributes more to the price discovery process. Furthermore, employing the classified data of institutional and individual trading volume, we investigate the impacts of institutions and individuals on the price discovery performance of futures market. The results show that institutional trading positively improves the futures market's contribution to price discovery, whereas individual trading is found to have an adverse impact on the price efficiency in the futures market.

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  • Xu, Feng & Wan, Difang, 2015. "The impacts of institutional and individual investors on the price discovery in stock index futures market: Evidence from China," Finance Research Letters, Elsevier, vol. 15(C), pages 221-231.
    • Handle: RePEc:eee:finlet:v:15:y:2015:i:c:p:221-231
    DOI: 10.1016/j.frl.2015.10.002
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    More about this item

    Keywords

    Institutional investors; Individual investors; Stock index futures market; Price discovery; Informed investors; Noise traders;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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