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The Expiration Effects of Stock-Index Derivatives: Empirical Evidence from the Taiwan Futures Exchange

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  • Heng Chih Chou
  • Wei Ning Chen
  • Dar Hsin Chen

Abstract

Five index derivatives with the same expiration days, settlement days, and settlement systems have been consecutively traded on the Taiwan Futures Exchange (TAIFEX) since 1998. This paper examines the expiration effects of TAIFEX index derivatives on the underlying stock market between 1998 and 2002. Our empirical findings show no significant expiration effects on the expiration day, but evidence demonstrates that expiration effects have strengthened as more relative index derivatives are listed on the TAIFEX. Meanwhile, the expiration effects seem to shift to the opening of the settlement day. In general, the expiration effects in Taiwan are not as significant as those in U.S. markets but are stronger than those in the Hong Kong market. The special settlement procedures adopted by the TAIFEX may account for the difference.

Suggested Citation

  • Heng Chih Chou & Wei Ning Chen & Dar Hsin Chen, 2006. "The Expiration Effects of Stock-Index Derivatives: Empirical Evidence from the Taiwan Futures Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(5), pages 81-102, October.
    • Handle: RePEc:mes:emfitr:v:42:y:2006:i:5:p:81-102
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    Citations

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    Cited by:

    1. 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.
    2. Chhabra, Damini & Gupta, Mohit, 2022. "Calendar anomalies in commodity markets for natural resources: Evidence from India," Resources Policy, Elsevier, vol. 79(C).
    3. Vladimir Pyrlik & Pavel Elizarov & Aleksandra Leonova, 2021. "Forecasting Realized Volatility Using Machine Learning and Mixed-Frequency Data (the Case of the Russian Stock Market)," CERGE-EI Working Papers wp713, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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