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Restrictions on Short-Selling and Spot-Futures Dynamics

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  • Joseph K. W. Fung

    (Department of Finance and Decision Sciences, Hong Kong Baptist University)

  • Li Jiang

    (Department of Finance and Decision Sciences, Hong Kong Baptist University)

Abstract

Recent lifting of short-sales constraints in Hong Kong provides an important opportunity to examine whether such restrictions affect the dynamic relationship between index futures and its underlying spot. The results show that the two prices have become more closely integrated without the restrictions. Adjustments to long-run equilibrium are accomplished more through index futures; however, the spot index has played an increasingly more important role in the lead-lag relationship after the deregulation. Market conditions, spot trading volumes, relative futures trading volumes and institutional participation also affect the dynamic relationship. Copyright Blackwell Publishers Ltd 1999.

Suggested Citation

  • Joseph K. W. Fung & Li Jiang, 1999. "Restrictions on Short-Selling and Spot-Futures Dynamics," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(1-2), pages 227-248.
  • Handle: RePEc:bla:jbfnac:v:26:y:1999-01:i:1-2:p:227-248
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    Citations

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    Cited by:

    1. Joseph K.W. Fung & Philip Yu, 2007. "Order Imbalance and the Dynamics of Index and Futures Prices," Working Papers 072007, Hong Kong Institute for Monetary Research.
    2. Helder SebastiĆ£o, 2008. "The partial adjustment factors of FTSE 100 stock index and stock index futures: The informational impact of electronic trading systems," GEMF Working Papers 2008-07, GEMF, Faculty of Economics, University of Coimbra.
    3. David M. Schizer & Michael R. Powers & Martin Shubik, 2003. "Market Bubbles and Wasteful Avoidance: Tax and Regulatory Constraints on Short Sales," Yale School of Management Working Papers ysm356, Yale School of Management.
    4. Dungey, Mardi & McKenzie, Michael D. & Yalama, Abdullah, 2013. "The cross market effects of short sale restrictions," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 53-71.
    5. Joseph K.W. Fung, 2006. "Order Imbalance and the Pricing of Index Futures," Working Papers 132006, Hong Kong Institute for Monetary Research.
    6. Lin, Emily & Lee, Cheng-Few & Wang, Kehluh, 2013. "Futures mispricing, order imbalance, and short-selling constraints," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 408-423.

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