The Volatility and Information Content of End-of-the-Day on Stock Price Index Futures for TAIFEX

• Main Authors: Chung Yi-Hui, 鍾怡蕙
• Other Authors: 黃彥聖
• Format: Others
• Language: zh-TW
• Published: 2000
• Online Access: http://ndltd.ncl.edu.tw/handle/12890636385709854758

碩士 === 國立臺灣科技大學 === 管理研究所企業管理學程 === 88 === The Taiwan Index Futures is chosen for this study to test whether the futures price in the end-of-the-day period reflects the private information revealed by informed traders. The purpose of this study attempts to investigate the intraday patterns of volatility for TAIFEX and what reasons caused volatility in the EOD period. Daily data are collected from September 1 1998 through November 8 1999. The results are as follows: 1.Analysis of the pattern of volatility for TAIFEX: (1)The volatility is driven mainly by the release of private information in trading time for TAIFEX. (2)The periodic call auction method is used by TAIFEX at the opening and closing periods. This trading mechanism is related to higher return volatility. (3)The volatility of TAIFEX follows a U-shaped pattern before the TSE closes, but the volatility declines quickly in the EOD period. The results consist with extended market closure theory with the intraday data. Nevertheless, EOD futures return volatility for the day of the week is incompletely consistent with this result. 2.Analysis of what reasons caused volatility in the EOD period: (1)The EOD return volatility is caused by the dominating power of market price changes from TSE to TAIFEX when the spot market is closed. (2)The EOD return volatility is associated with the production of private information. (3)TAIFEX uses a periodic call auction method to determine the closing price for the last five minutes. It causes higher return volatility in the EOD period. 3.According to variance ratio, most of private information flow reflects from nine to twelve o’clock in the trading time. But the information flow in EOD period is greater than that in the non-trading period. Therefore, these results indicate that the futures price in the EOD period is more useful than overnight spot returns in terms of reflecting private information. 4.A positive correlation exists between EOD futures returns and overnight spot returns. Therefore, the uninformed traders do not spend extraneous expenses on collecting information. They can observe the price change in the EOD period to forecast the opening price for the spot in the next trading day.