The intra-day price discovery process between the Singapore Exchange and Taiwan Futures Exchange

✍ Scribed by Matthew Roope; Ralf Zurbruegg

• Publisher: John Wiley and Sons
• Year: 2002
• Tongue: English
• Weight: 140 KB
• Volume: 22
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.2215

✦ Synopsis

Abstract

This paper focuses on the increasing competition between exchanges for listing similar index futures contracts
and the impact this has on information dissemination between various markets. Specifically, using both the
Hasbrouck and Gonzalo–Granger methodologies for extracting the information content held in each market, a
comparison of information efficiencies between the Singapore Exchange and the Taiwan Futures Exchange is examined
for Taiwan Index Futures listed in both markets. The results show not only a common stochastic trend between
index futures and their underlying indices, but also provide strong evidence to suggest price discovery primarily
originates from the Singapore futures market. There are direct implications of this result for both financial
exchanges and traders—in particular, that traders realize price determination can arise from both futures
markets, and the need for exchanges to maintain a reputation as an information center for these similarly traded
financial instruments. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22: 219–240, 2002