The Impacts of Trading Activity on Price Discovery in Taiwan Stock and Futures Markets

• Main Authors: Pei-Yi Liu, 劉沛宜
• Other Authors: Chien-Liang Chiu
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/35623998592803029964

碩士 === 淡江大學 === 財務金融學系碩士班 === 103 === This study focuses on price discovery of futures trading activities in Taiwan stock and futures markets. We use（volume/open interest） as the proxy variable for speculative trading and investigates their dynamic relationships by MIS. Volume and open interest are not only the conduits through which information is impounded into price changes, but show how traders（informed and uninformed）adjust their trading strategies. Hence informed traders can make speculative profits by futures trading. Trading activities are partitioned expected and unexpected components, and document that while price discovery varies positively with unexpected futures-trading activity, it is negatively related to forecastable futures-trading activity. We also analyze whether greater price discovery（volume and open interest）is associated with greater volatility in futures market. Our results indicate that high volatility exert the stronger impacts on price discovery. When comparing the performances of foreign investors, proprietary traders and retail traders, this study finds the impacts of foreign investors are best on price discovery.