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Expiration-day effect: evidence from high-frequency data in the Hong Kong stock market

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  • Andy Kan

Abstract

By employing high-frequency data, a series of minute-by-minute HSI data, this paper examines whether the expiration-day effect exists in the last trading period before the market closes in the Hong Kong stock market. Contrary to the previous findings in the well-developed US markets, this paper finds that the expiration-day effect neither exists on the whole expiration day nor in the last trading time of the expiration day before the market closes. This study suggests that the expiration-day effects are not unavoidable by-products of the creation of index futures in the stock market.

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  • Andy Kan, 2001. "Expiration-day effect: evidence from high-frequency data in the Hong Kong stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 11(1), pages 107-118.
    • Handle: RePEc:taf:apfiec:v:11:y:2001:i:1:p:107-118
    DOI: 10.1080/09603100150210318
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    References listed on IDEAS

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    1. John J. Merrick Jr., 1987. "Volume determination in stock and stock index futures markets: An analysis of arbitrage and volatility effects," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 7(5), pages 483-496, October.
    2. Sang Bin Lee & Ki Yool Ohk, 1992. "Stock index futures listing and structural change in time‐varying volatility," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 12(5), pages 493-509, October.
    3. Anthony F. Herbst & Edwin D. Maberly, 1990. "Stock index futures, expiration day volatility, and the “special” friday opening: A note," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 10(3), pages 323-325, June.
    4. Bessembinder, Hendrik & Seguin, Paul J, 1992. "Futures-Trading Activity and Stock Price Volatility," Journal of Finance, American Finance Association, vol. 47(5), pages 2015-2034, December.
    5. Anthony F. Herbst & Edwin D. Maberly, 1991. "An alternative methodology for measuring expiration day price effects at Friday's close: The expected price reversal—A note," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 11(6), pages 751-754, December.
    6. Rutledge, D J S, 1976. "A Note on the Variability of Futures Prices," The Review of Economics and Statistics, MIT Press, vol. 58(1), pages 118-120, February.
    7. John J. Merrick, 1987. "Volume determination in stock and stock index futures markets: an analysis of arbitrage and volatility effects," Working Papers 87-2, Federal Reserve Bank of Philadelphia.
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    Cited by:

    1. Sanvicente, A. Z., 2002. "A Guerra entre Comprados e Vendidos no Mercado de Opções de Compra da Bolsa de Valores de São Paulo," Finance Lab Working Papers flwp_44, Finance Lab, Insper Instituto de Ensino e Pesquisa.
    2. Rachna Mahalwala, 2016. "A Study of Expiration-day Effects of Index Derivatives Trading in India," Metamorphosis: A Journal of Management Research, , vol. 15(1), pages 10-19, June.
    3. Guglielmo Maria Caporale & Alex Plastun, 2023. "Witching days and abnormal profits in the us stock market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2182016-218, December.
    4. Sania Wadud & Robert D. Durand & Marc Gronwald, 2021. "Connectedness between the Crude Oil Futures and Equity Markets during the Pre- and Post-Financialisation Eras," CESifo Working Paper Series 9202, CESifo.
    5. Chung, Huimin & Hseu, Mei-Maun, 2008. "Expiration day effects of Taiwan index futures: The case of the Singapore and Taiwan Futures Exchanges," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 107-120, April.
    6. Gurmeet Singh & Muneer Shaik, 2020. "Re-examining the Expiration Effects of Index Futures: Evidence from India," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 16-23.
    7. Lien, Donald & Yang, Li, 2005. "Availability and settlement of individual stock futures and options expiration-day effects: evidence from high-frequency data," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 730-747, September.

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