Taiwan Futures Market Price Discovery Process-the Case of Taiwan Stock Index Futures and Mini Index Futures

• Main Authors: Meng-chen Lai, 賴孟辰
• Other Authors: Cheng-Yi Shiu
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/26591607925965010853

碩士 === 國立中央大學 === 財務金融研究所 === 99 === Two futures contracts which have the same underlying asset do not have the simultaneous price reactions toward new information due to the differences in trader composition, contract specification, trading cost, and so on. The leading contract can reflect the new information in its price earlier. This article compares the information reaction efficiency and price discovery ability of the TX with MTX, the two important futures contracts traded in Taiwan Futures Exchange. Empirical results from pricing error model and relative information efficiency method suggest that two contracts have similar degree of random walk approximation. However, TX is shown to have better price discovery ability than MTX has. The article also finds that the local traders have better price discovery ability than foreign traders. The frequency and the trading volume of local traders are both much greater than foreign traders’, and this will decrease the explanation power of information share model.