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

Yue Cheong Chan; Tsz Wan Cheng

doi:10.1007/s11156-009-0108-0

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 publication › Journal article › Academic research › peer-review

1 Citation (Scopus)

Abstract

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 language	English
Pages (from-to)	159-176
Number of pages	18
Journal	Review of Quantitative Finance and Accounting
Volume	33
Issue number	2
DOIs	https://doi.org/10.1007/s11156-009-0108-0
Publication status	Published - 1 Jul 2009

Keywords

Price continuations
Price reversals
Return correlations
Transitory price changes
Variance ratio

ASJC Scopus subject areas

Accounting
General Business,Management and Accounting
Finance

More information

10.1007/s11156-009-0108-0

Cite this

@article{b1455a303a8647329091776422fdfc20,

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

abstract = "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.",

keywords = "Price continuations, Price reversals, Return correlations, Transitory price changes, Variance ratio",

author = "Chan, {Yue Cheong} and Cheng, {Tsz Wan}",

year = "2009",

month = jul,

day = "1",

doi = "10.1007/s11156-009-0108-0",

language = "English",

volume = "33",

pages = "159--176",

journal = "Review of Quantitative Finance and Accounting",

issn = "0924-865X",

publisher = "Springer New York",

number = "2",

}

TY - JOUR

T1 - Price reversals versus price continuations: The transitory price effects of futures trading extension on the underlying stock market

AU - Chan, Yue Cheong

AU - Cheng, Tsz Wan

PY - 2009/7/1

Y1 - 2009/7/1

N2 - 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.

AB - 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.

KW - Price continuations

KW - Price reversals

KW - Return correlations

KW - Transitory price changes

KW - Variance ratio

UR - http://www.scopus.com/inward/record.url?scp=70349336423&partnerID=8YFLogxK

U2 - 10.1007/s11156-009-0108-0

DO - 10.1007/s11156-009-0108-0

M3 - Journal article

SN - 0924-865X

VL - 33

SP - 159

EP - 176

JO - Review of Quantitative Finance and Accounting

JF - Review of Quantitative Finance and Accounting

IS - 2

ER -

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

Abstract

Keywords

ASJC Scopus subject areas

More information

Other files and links

Fingerprint

Cite this