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One Market? Stocks, Futures, and Options during October 1987

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  • Kleidon, Allan W
  • Whaley, Robert E

Abstract

The authors provide new evidence regarding the degree of integration among markets for stocks, futures, and options prior to and during the October 1987 market crash. Where previous analyses have resulted in recommendations for the implementation of circuit breakers, the coordination of margin requirements across markets, and changes in regulatory jurisdiction, their analysis indicates that delinkage between markets during the crash was primarily caused by an antiquated mechanism for processing stock-market orders. The results suggest that market integration may be better served by efficient order execution than by further restricting markets. Copyright 1992 by American Finance Association.

Suggested Citation

  • Kleidon, Allan W & Whaley, Robert E, 1992. " One Market? Stocks, Futures, and Options during October 1987," Journal of Finance, American Finance Association, vol. 47(3), pages 851-877, July.
  • Handle: RePEc:bla:jfinan:v:47:y:1992:i:3:p:851-77
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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. Taufiq Hassan & Shamsher Mohamad & Mohamad Ariff & Annuar Md Nassir, 2007. "Stock Index Futures Prices and the Asian Financial Crisis-super-," International Review of Finance, International Review of Finance Ltd., vol. 7(3-4), pages 119-141.
    3. deB. Harris, Frederick H. & McInish, Thomas H. & Chakravarty, Ranjan R., 1995. "Bids and asks in disequilibrium market microstructure: The case of IBM," Journal of Banking & Finance, Elsevier, vol. 19(2), pages 323-345, May.
    4. Nilsson, Roland, 2008. "The value of shorting," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 880-891, May.
    5. Cakici, Nusret & Goswami, Gautam & Tan, Sinan, 2014. "Options resilience during extreme volatility: Evidence from the market events of May 2010," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 262-274.
    6. Ghysels, Eric & Seon, Junghoon, 2005. "The Asian financial crisis: The role of derivative securities trading and foreign investors in Korea," Journal of International Money and Finance, Elsevier, vol. 24(4), pages 607-630, June.
    7. Röthig, Andreas, 2004. "Currency Futures and Currency Crises," Darmstadt Discussion Papers in Economics 136, Darmstadt University of Technology, Department of Law and Economics.
    8. Hou, Yang & Nartea, Gilbert, 2017. "Price Discovery in the Stock Index Futures Market: Evidence from the Chinese stock market crash," MPRA Paper 81995, University Library of Munich, Germany.
    9. Joseph K.W. Fung, 2006. "Order Imbalance and the Pricing of Index Futures," Working Papers 132006, Hong Kong Institute for Monetary Research.

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