The Impact of Trading Rules on the Price Discovery betweenFutures and Spot Market: Evidence from Taiwan

• Main Authors: Huang, Yi-Ju, 黃怡儒
• Other Authors: Hung, Jui-Cheng
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/98422558339067714392

碩士 === 中國文化大學 === 財務金融學系 === 102 === The purpose of this paper is to investigate the impact of implementing SPAN system and reducing trading taxes of futures on price discovery between spot and futures markets in Taiwan. The research data is obtained from TEJ and the research period starts from January 3, 2005 to December 31, 2012, which are totally 1,990 trading days. To match spot and futures data during each trading day, every one minutes closing price is selected from 9:01 a.m. to 13:24 p.m. We calculate one minute returns for futures and spot prices, and there are 264 one-minute returns for each trading day and 527,348 returns for whole research period.The unit root test, cointegration test, vector error correction model and information share approach are applied in this paper. Cointegration test indicates that there exists a long-run equilibrium relationship between futures and spot prices, and Information share shows that futures market contributes to the price discovery more than spot market does. The empirical findings are as follows. Firstly, the tax reduction of trading futures in 2006 causes an increase in trading volume of futures, and thus increases the price discovery of futures market. However, the tax reduction of trading futures in 2008 does not have significant impact on price discovery of futures market. The insignificant impact might be explained by small magnitude of tax reduction in 2008 as compared with that in 2006. Secondly, implementing SPAN system decreases the cost of capital for traders, which improves transaction willingness and increases futures trading volume. Thus, implementing SPAN system will promote the price discovery of the futures market.