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The Shift of Weekend Effects in Taiwan's Equity Index Return: Index Futures Listings or Other Alternative Explanations

Author

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  • Anthony H. Tu

    (Department of Finance, College of Commerce, National Chengchi University, Taipei 11623, Taiwan, R.O.C.)

Abstract

This paper investigates the impact of index futures tradings on day-of-the-week effects for the equity index in Taiwan's equity market. Using the extensive model of Hiraki, Maberly and Taube (1998), the empirical findings support the hypothesis that the introduction of index futures has a significant impact on the return structure, both in terms of daily seasonalities and the lag effects of past returns on current returns. Of particular interest, Tuesday effects gradually disappeared after the introduction of index futures, and in the post-futures period, Monday returns are found to be anomalous. After controlling non-normality of the error distribution and time-varying conditional variance, the results indicate that the Monday and the Tuesday effects co-exist after the index futures listings. Although the US equity market is shown to have a strong influence on the Taiwan's market, the pattern of weekend effects shift remains unchanged after taking the US spillover into account. The closing of Saturday trading is found to be a partial cause of the observed shift.

Suggested Citation

  • Anthony H. Tu, 2003. "The Shift of Weekend Effects in Taiwan's Equity Index Return: Index Futures Listings or Other Alternative Explanations," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 549-572.
    • Handle: RePEc:wsi:rpbfmp:v:06:y:2003:i:04:n:s0219091503001195
    DOI: 10.1142/S0219091503001195
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    Citations

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    Cited by:

    1. Kenneth Hogholm & Johan Knif & Seppo Pynnonen, 2011. "Common and local asymmetry and day-of-the-week effects among EU equity markets," Quantitative Finance, Taylor & Francis Journals, vol. 11(2), pages 219-227.
    2. Högholm, Kenneth & Knif, Johan, 2009. "The impact of portfolio aggregation on day-of-the-week effect: Evidence from Finland," Global Finance Journal, Elsevier, vol. 20(1), pages 67-79.

    More about this item

    Keywords

    Day-of-the-week effects; index futures; weekend effects; spillover effects; JEL Classification G13; JEL Classification G15;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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