Share This Article:

The Efficiency Research on Stock Index Derivatives in a Bear Market—The Evidences from Hangseng Index Derivatives Markets

Abstract Full-Text HTML Download Download as PDF (Size:148KB) PP. 101-106
DOI: 10.4236/ti.2013.42012    4,426 Downloads   6,209 Views  
Author(s)    Leave a comment

ABSTRACT

This paper examines the relationships among Hangseng index and its related derivatives in a bear market. The Johansen Co-integration and vector error correction model are used to analyze the relationships between markets. The main results are as follows: 1) The lead-lag relationships show that Hangseng index futures and option markets play a more important price discovery role; 2) The pricing efficiency test demonstrates that both Hangseng index futures and options markets are all efficient; 3) It proves that the existence of Hangseng index option market has a huge promotion effect to Hangseng cash and futures markets and increases their liquidity. This conclusion gives evidence thatChinashould launch the stock index options with the same underlying index in due time and form a pattern that stock index futures and option markets develop in parallel.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

J. Wei, "The Efficiency Research on Stock Index Derivatives in a Bear Market—The Evidences from Hangseng Index Derivatives Markets," Technology and Investment, Vol. 4 No. 2, 2013, pp. 101-106. doi: 10.4236/ti.2013.42012.

References

[1] H. R. Stoll and R. E. Whaley, “Expiration Day Effects of Index Options and Futures,” Monograph Series in Finance and Economics, New York University Monograph, 1986.
[2] I. G. Kawaller, P. D. Koch and T. W. Koch, “The Temporal Price Relationship between S&P500 Futures and S&P500 Index,” The Journal of Finance, Vol. 42, 1987, pp. 1309-1329.
[3] A. Hodgson, A. M. M. Masih and R. Masih, “Futures Trading Volume as a Determinant of Prices in Different Momentum Phases,” International Review of Financial Analysis, Vol. 15, No. 1, 2006, pp. 68-85. doi:10.1016/j.irfa.2004.10.014
[4] J. Fleming, B. Ostdiek and R. E. Whaley, “Trading Costs and the Relative Rate of Price Discovery in Stock, Futures and Option Markets,” The Journal of Futures Markets, Vol. 20, 1996, pp. 467-487.
[5] K. D. Garbade and W. L. Silber, “Price Movements and Price Discovery in Futures and Cash Markets,” The Re view of Economics and Statistics, Vol. 65, No. 2, 1983, pp. 289-297. doi:10.2307/1924495
[6] A. F. Herbst, J. P. McCormack and E. N. West, “Investigation of a Lead-Lag Relationship between Spot Stock Indices and Their Futures Contracts,” The Journal of Futures Markets, Vol. 7, No. 4, 1987, pp. 373-381. doi:10.1002/fut.3990070403
[7] H. R. Stoll and R. E. Whaler, “The Dynamic of Stock Index and Stock Index Futures Returns,” The Journal of Financial and Quantitative Analysis, Vol. 25, No. 4, 1990, pp. 441-468. doi:10.2307/2331010
[8] T. C. Schroeder and B. K. Goodwin, “Price Discovery and Cointegration for Live Hogs,” The Journal of Futures Markets, Vol. 11, No. 6, 1991, pp. 685-696. doi:10.1002/fut.3990110604
[9] K. Chan, “A Future Analysis of the Lead-Lag Relation ship between the Cash Market and Stock Index Futures Market,” The Review of Financial Studies, Vol. 5, No. 1, 1992, pp. 123-152. doi:10.1093/rfs/5.1.123
[10] S. Manaster and R. Rendleman Jr., “Option Prices as Predictors of Equilibrium Stock Prices,” The Journal of Finance, Vol. 37, No. 4, 1982, pp. 1043-1057. doi:10.1111/j.1540-6261.1982.tb03597.x
[11] M. Bhattacharya, “Price Changes of Related Securities: The Case of Call Options and Stocks,” The Journal of Financial and Quantitative Analysis, Vol. 22, No. 1, 1987, pp. 1-15. doi:10.2307/2330866
[12] J. H. Anthony, “The Interrelation of Stock and Options Market Trading Volume Data,” The Journal of Finance, Vol. 43, No. 4, 1988, pp. 949-964. doi:10.1111/j.1540-6261.1988.tb02614.x
[13] J. A. Stephan and R. E. Whaley, “Intraday Price Change and Trading Volume Relations in the Stock and Stock Option Markets,” The Journal of Finance, Vol. 45, No. 1, 1990, pp. 191-220. doi:10.1111/j.1540-6261.1990.tb05087.x
[14] T. J. Finuncane, “Put-Call Parity and Expected Returns,” The Journal of Financial and Quantitative Analysis, Vol. 26, No. 4, 1991, pp. 445-447. doi:10.2307/2331405
[15] K. Chan, Y. P. Chung and H. Johnson, “Why Option Prices Lag Stock Prices: A Trading Based Explanation,” The Journal of Finance, Vol. 48, No. 5, 1993, pp. 1957-1967. doi:10.1111/j.1540-6261.1993.tb05136.x
[16] O. Gwilym and M. Buckle, “The Lead-Lag Relationship between the FTSE 100 Stock Index and Its Derivative Contracts,” Applied Financial Economics, Vol. 11, No. 4, 2001, pp. 385-393. doi:10.1080/096031001300313947
[17] R. Chianga and W.-M. Fongb, “Relative Informational Efficiency of Cash, Futures and Options Markets: The Case of an Emerging Market,” Journal of Banking & Finance, Vol. 25, No. 2, 2001, pp. 355-375. doi:10.1016/S0378-4266(99)00127-2
[18] O. N. Seung, Y. O. Seung and K. K. Hyun, “An Empiri cal Analysis of the Price Discovery and the Pricing Bias in the KOSPI200 Stock Index Derivatives Markets,” International Review of Financial Analysis, Vol. 15, No. 4-5, 2006, pp. 398-414. doi:10.1016/j.irfa.2006.02.003
[19] O. N. Seung, Y. O. Seung and K. K. Hyun, “The Time Difference of a Measurement Unit in the Lead-Lag Relationship Analysis of Korean Financial Market,” International Review of Financial Analysis, Vol. 17, 2008, pp. 398-414.
[20] R. Chianga and Zh. Zhenlong, “Unbiased Estimation, Price Discovery and Market Efficiency: Relationship between Futures Prices and Spot Prices,” Systems Engineering-Theory & Practice, Vol. 8, 2008, pp. 2-11.
[21] M. H. Ibrahim, “Macroeconomic Forces and Capital Market Integration: A VAR Analysis for Malaysia,” Journal of the Asia Pacific Economy, Vol. 8, No. 1, 2003, pp. 19 40. doi:10.1080/1354786032000045228
[22] H. Akaile, “Autoregressive Model Fitting for Control,” Annals of the Institute of Statistical Mathematics, Vol. 22, 1970, pp. 163-180.
[23] R. Ajayi, J. Friedman and S. M. Mehdian, “On the Relationship between Stock Returns and Exchanges Rates: Tests of Granger Causality,” Global Finance Journal, Vol. 9, No. 2, 1998, pp. 241-251. doi:10.1016/S1044-0283(98)90006-0

  
comments powered by Disqus

Copyright © 2019 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.