IDEAS home Printed from https://ideas.repec.org/a/eee/intfin/v18y2008i2p107-120.html
   My bibliography  Save this article

Expiration day effects of Taiwan index futures: The case of the Singapore and Taiwan Futures Exchanges

Author

Listed:
  • Chung, Huimin
  • Hseu, Mei-Maun

Abstract

This paper examines the expiration day effects of Taiwan Futures Exchange (TAIFEX) Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) futures (TX), and Singapore Exchange (SGX) Morgan Stanley Capital International (MSCI) Taiwan stock index (MSCI-TW) futures, under different settlement procedures. The results indicate significant price reversal, volatility and abnormal volume stemming from the expiration of the MSCI-TW futures, as compared to the TX, with the expiration day effects becoming much more significant following the adoption of the 5Â min closing call procedure by the Taiwan Stock Exchange Corporation (TSEC). The results would seem to support the view that using an average price settlement based on a longer period would mitigate expiration day effects much better than a closing price settlement.

Suggested Citation

  • Chung, Huimin & Hseu, Mei-Maun, 2008. "Expiration day effects of Taiwan index futures: The case of the Singapore and Taiwan Futures Exchanges," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 107-120, April.
    • Handle: RePEc:eee:intfin:v:18:y:2008:i:2:p:107-120
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042-4431(06)00055-2
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lee, Chun I & Mathur, Ike, 1999. "The Influence of Information Arrival on Market Microstructure: Evidence from Three Related Markets," The Financial Review, Eastern Finance Association, vol. 34(1), pages 1-26, February.
    2. Comerton-Forde, Carole & Rydge, James, 2006. "Call auction algorithm design and market manipulation," Journal of Multinational Financial Management, Elsevier, vol. 16(2), pages 184-198, April.
    3. Christian Schlag, 1996. "Expiration day effects of stock index derivatives in Germany," European Financial Management, European Financial Management Association, vol. 2(1), pages 69-95, March.
    4. Madhavan, Ananth, 1992. "Trading Mechanisms in Securities Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 607-641, June.
    5. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2003. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, edition 1, volume 1, number 1.
    6. Andy Kan, 2001. "Expiration-day effect: evidence from high-frequency data in the Hong Kong stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 11(1), pages 107-118.
    7. Per Alkeback & Niclas Hagelin, 2004. "Expiration day effects of index futures and options: evidence from a market with a long settlement period," Applied Financial Economics, Taylor & Francis Journals, vol. 14(6), pages 385-396.
    8. N/A, 2004. "Index for 2004," European Union Politics, , vol. 5(4), pages 511-512, December.
    9. John Board & Charles Sutcliffe, 1996. "The dual listing of stock index futures: Arbitrage, spread arbitrage, and currency risk," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(1), pages 29-54, February.
    10. Madhavan, Ananth & Panchapagesan, Venkatesh, 2000. "Price Discovery in Auction Markets: A Look Inside the Black Box," The Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 627-658.
    11. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2003. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, edition 1, volume 1, number 2.
    12. Hans R. Stoll & Robert E. Whaley, 1997. "Expiration†Day Effects of the All Ordinaries Share Price Index Futures: Empirical Evidence and Alternative Settlement Procedures," Australian Journal of Management, Australian School of Business, vol. 22(2), pages 139-174, December.
    13. Shen-Yuan Chen & Ching-Chung Lin & Pin-Huang Chou & Dar-Yeh Hwang, 2002. "A Comparison of Hedge Effectiveness and Price Discovery between TAIFEX TAIEX Index Futures and SGX MSCI Taiwan Index Futures," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 277-300.
    14. Comerton-Forde, Carole & Rydge, James, 2006. "The influence of call auction algorithm rules on market efficiency," Journal of Financial Markets, Elsevier, vol. 9(2), pages 199-222, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. repec:wyi:journl:002180 is not listed on IDEAS
    3. Blasco, N. & Corredor, P. & Satrústegui, N., 2023. "Is there an expiration effect in the bitcoin market?," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 647-663.
    4. Frino, Alex & Harris, Frederick H.deB. & Lepone, Andrew & Wong, Jin Boon, 2013. "The relationship between satellite and home market volumes: Evidence from cross-listed Singapore futures contracts," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 301-311.
    5. Edward Chow & Chung-Wen Hung & Christine Liu & Cheng-Yi Shiu, 2013. "Expiration day effects and market manipulation: evidence from Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 41(3), pages 441-462, October.
    6. 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.
    7. Kumar, S.S.S. & Sampath, Aravind, 2019. "What drives the off-shore futures market? Evidence from India and China," Finance Research Letters, Elsevier, vol. 30(C), pages 394-402.
    8. Alex Plastun & Ludmila Khomutenko & Serhii Bashlai, 2022. "Is There Any Witching in the Cryptocurrency Market?," JRFM, MDPI, vol. 15(2), pages 1-14, February.
    9. Biao Guo & Qian Han & Maonan Liu & Doojin Ryu, 2013. "A Tale of Two Index Futures: The Intraday Price Discovery Process between the China Financial Futures Exchange and the Singapore Exchange," Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sobhesh Kumar Agarwalla & Ajay Pandey, 2013. "Expiration‐Day Effects and the Impact of Short Trading Breaks on Intraday Volatility: Evidence from the Indian Market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 33(11), pages 1046-1070, November.
    2. Rachna Mahalwala, 2016. "A Study of Expiration-day Effects of Index Derivatives Trading in India," Metamorphosis: A Journal of Management Research, , vol. 15(1), pages 10-19, June.
    3. Hsieh, Shu-Fan & Ma, Tai, 2009. "Expiration-day effects: Does settlement price matter?," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 290-300, March.
    4. Milena Suliga, 2017. "Price reversal as potential expiration day effect of stock and index futures: evidence from Warsaw Stock Exchange," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 18(2), pages 201-225.
    5. Chaoshin Chiao & Zi-May Wang & Shiau-Yuan Tong, 2017. "Order cancellations across investor groups: evidence from an emerging order-driven market," Review of Quantitative Finance and Accounting, Springer, vol. 49(4), pages 1167-1193, November.
    6. Gurmeet Singh & Muneer Shaik, 2020. "Re-examining the Expiration Effects of Index Futures: Evidence from India," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 16-23.
    7. Tsung-Yu Hsieh, 2015. "Information disclosure and price manipulation during the pre-closing session: evidence from an order-driven market," Applied Economics, Taylor & Francis Journals, vol. 47(43), pages 4670-4684, September.
    8. Chen, Tao & Cai, Jun & Ho, Richard Y.K., 2009. "Intraday information efficiency on the Chinese equity market," China Economic Review, Elsevier, vol. 20(3), pages 527-541, September.
    9. Chan, Shu Hui & Huang, Yu Chuan & Lin, Sheng-Min, 2020. "Market transparency and closing price behavior on month-end days: Evidence from Taiwan," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    10. Silvio John Camilleri, 2015. "The Impact of Stock Market Structure on Volatility: Evidence from a Call Auction Suspension," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(2), pages 44-53, April.
    11. Camilleri, Silvio John, 2015. "Do call auctions curtail price volatility? Evidence from the National Stock Exchange of India," MPRA Paper 95301, University Library of Munich, Germany.
    12. Sumon Bhaumik & Suchismita Bose, 2007. "Impact of Derivatives Trading on Emerging Capital Markets: A Note on Expiration Day Effects in India," William Davidson Institute Working Papers Series wp863, William Davidson Institute at the University of Michigan.
    13. Ester Félez‐Viñas & Björn Hagströmer, 2021. "Do volatility extensions improve the quality of closing call auctions?," The Financial Review, Eastern Finance Association, vol. 56(3), pages 385-406, August.
    14. Park, Seongkyu “Gilbert” & Suen, Wing & Wan, Kam-Ming, 2022. "Call auction design and closing price manipulation: Evidence from the Hong Kong stock exchange," Journal of Financial Markets, Elsevier, vol. 58(C).
    15. Xiaoyan Ni, Sophie & Pearson, Neil D. & Poteshman, Allen M., 2005. "Stock price clustering on option expiration dates," Journal of Financial Economics, Elsevier, vol. 78(1), pages 49-87, October.
    16. Joseph K.W. Fung & Haynes H.M. Yung, 2007. "Expiration-Day Effects - An Asian Twist," Working Papers 012007, Hong Kong Institute for Monetary Research.
    17. 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.
    18. 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.
    19. Carole Comerton-Forde & James Rydge & Hayley Burridge, 2007. "Not all call auctions are created equal: evidence from Hong Kong," Review of Quantitative Finance and Accounting, Springer, vol. 29(4), pages 395-413, November.
    20. Auguste, Sebastian & Dominguez, Kathryn M.E. & Kamil, Herman & Tesar, Linda L., 2006. "Cross-border trading as a mechanism for implicit capital flight: ADRs and the Argentine crisis," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1259-1295, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:intfin:v:18:y:2008:i:2:p:107-120. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/intfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.