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Arbitrage trading and price discovery of the regular and mini Taiwan stock index futures

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  • Yu‐Lun Chen
  • Yen‐Hsien Lee
  • Robin K. Chou
  • Ya‐Kai Chang

Abstract

We investigate the contributions of the Taiwan regular and mini index futures to price discovery. We find that the regular futures provide more price discovery, which is inconsistent with the findings for the US futures markets. This dominance of regular futures became relatively weaker after the introduction of the standard portfolio analysis of the risk margin system because of more arbitrage trades mainly executed by institutional investors. We show the effect of the introduction of an integrated margin system on the price‐discovery processes and efficiencies for futures with the same underlying asset but different contract sizes.

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  • 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.
    • Handle: RePEc:wly:jfutmk:v:41:y:2021:i:6:p:926-948
    DOI: 10.1002/fut.22192
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    References listed on IDEAS

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    Cited by:

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    2. Yu‐Lun Chen & J. Jimmy Yang, 2024. "Time‐varying price discovery in regular and microbitcoin futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(1), pages 103-121, January.

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