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

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  • Wen‐Liang Gideon Hsieh

Abstract

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

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  • Wen‐Liang Gideon Hsieh, 2009. "Expiration‐day effects on individual stocks and the overall market: Evidence from Taiwan," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 29(10), pages 920-945, October.
    • Handle: RePEc:wly:jfutmk:v:29:y:2009:i:10:p:920-945
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    Cited by:

    1. Henryk Gurgul & Milena Suliga, 2020. "Impact of futures expiration on underlying stocks: intraday analysis for Warsaw Stock Exchange," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 28(3), pages 869-904, September.
    2. Guglielmo Maria Caporale & Alex Plastun, 2023. "Witching days and abnormal profits in the us stock market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2182016-218, December.
    3. Kyong S. Eom & Kyung Y. Kwon & Jong‐Ho Park, 2021. "Effectiveness of the conditional random‐end trading mechanism on the Korea Exchange: Normal trade and Option Shock," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(10), pages 1545-1568, October.
    4. Matthew Clifton, 2010. "Liquidity and Efficiency During Unusual Market Conditions: An Analysis of Short Selling Restrictions and Expiration-Day Procedures on the London Stock Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 14, July-Dece.
    5. Emily Lin & Carl R. Chen, 2019. "Settlement procedures and stock market efficiency," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(2), pages 164-185, February.
    6. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.

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