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Price discovery between regular and mini index futures in the Taiwan Futures Exchange

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  • Wang, Yun-Yi
  • Chang, Chiung-Chiao
  • Lee, Wan-Chen

Abstract

This study explores the dynamics of the price discovery process between the regular and mini index futures traded on the Taiwan Futures Exchange (TAIFEX). In contrast to the US futures market, the TAIFEX operates under an automated electronic trading system for both types of contracts. After controlling for the differences in the trading mechanisms, we demonstrate that mini index futures make a greater contribution than regular index futures to the price discovery process within the TAIFEX. Regression analyses show that both relative liquidity and relative changes in liquidity between regular and mini index futures contribute to the price discovery of the mini index futures.

Suggested Citation

  • Wang, Yun-Yi & Chang, Chiung-Chiao & Lee, Wan-Chen, 2013. "Price discovery between regular and mini index futures in the Taiwan Futures Exchange," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 224-237.
    • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:224-237
    DOI: 10.1016/j.iref.2012.10.001
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    4. Donald Lien & Ziling Wang & Xiaojian Yu, 2021. "Quantile information share under Markov regime‐switching," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(4), pages 493-513, April.
    5. Edward Curran & Jack Hunt & Vito Mollica, 2021. "Single stock futures and their impact on market quality: Be careful what you wish for," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(11), pages 1677-1692, November.
    6. Chen, Yu-Lun & Tsai, Wei-Che, 2017. "Determinants of price discovery in the VIX futures market," Journal of Empirical Finance, Elsevier, vol. 43(C), pages 59-73.
    7. Yu‐Lun Chen & Yen‐Hsien Lee & Robin K. Chou & Ya‐Kai Chang, 2021. "Arbitrage trading and price discovery of the regular and mini Taiwan stock index futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(6), pages 926-948, June.
    8. Weng, Pei-Shih & Tsai, Wei-Che, 2018. "Do foreign institutional traders have private information for the market index? The aspect of market microstructure," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 308-323.
    9. Liu, Dehong & Lung, Pei Peter & Lallemand, Justin, 2015. "Anticipation of takeovers in stock and options markets," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 19-35.
    10. Edward Curran & Jack Hunt & Vito Mollica, 2020. "Trading protocols and price discovery: Implicit transaction costs in Indian single stock futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(11), pages 1793-1806, November.

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    More about this item

    Keywords

    Price discovery; Information shares; Liquidity; Mini futures;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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