Price reversals versus price continuations: The transitory price effects of futures trading extension on the underlying stock market

Yue Cheong Chan, Tsz Wan Cheng

Research output: Journal article publicationJournal articleAcademic researchpeer-review

1 Citation (Scopus)


This paper examines the transitory price effects of index futures trading extension on the underlying stock market. Based on the model formulation of George and Hwang (1995) and Amihud and Mendelson (1987) and using the Hong Kong data, we find that the extension of futures trading hour helps to reduce the opening pricing errors and change the correlations between daytime and overnight stock returns. Our finding adds to the literature that the trading behavior of derivatives has a significant influence on the transitory price changes of the underlying cash products.
Original languageEnglish
Pages (from-to)159-176
Number of pages18
JournalReview of Quantitative Finance and Accounting
Issue number2
Publication statusPublished - 1 Jul 2009


  • Price continuations
  • Price reversals
  • Return correlations
  • Transitory price changes
  • Variance ratio

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)
  • Finance

Cite this