A Comparative Study on Interday Market Volatility and Intraday Price Transmission of Nikkei/JGB Futures Markets between Japan and Singapore

A Comparative Study on Interday Market Volatility and Intraday Price Transmission of Nikkei/JGB... Using both daily and intraday data, this paper investigates the impact of different futures trading mechanisms employed by TSE/OSE (automated system with Saitori matching) in Japan and SIMEX (open outcry) in Singapore. In order to examine the relative performance, we compare interday return volatility and intraday price transmission of Nikkei/JGB futures between Japan and Singapore. Regarding Nikkei futures, we find no significant difference in the performance measurements between OSE and SIMEX. We find both OSE and SIMEX have significant higher variances and negative first-order autocorrelation at the open than at the close. We also find Granger causality in both directions of intermarket price transmission between OSE and SIMEX. Regarding JGB futures, empirical results are different between TSE and SIMEX. JGB futures on SIMEX has a lower volatility at the open and first-order autocorrelation at the open is not significant. In addition, we find unidirectional lead from Japan to Singapore in JGB futures. In conclusion, since Japanese trading system does not reduce return volatility and causes delay in the open, the benefit of Saitori matching is questionable. On the other hand, we find weak evidence that the Japanese trading system is more efficient in price reporting. There is no conclusive evidence that either SIMEX open outcry or TSE/OSE Saitori matching dominates the price discovery process. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

A Comparative Study on Interday Market Volatility and Intraday Price Transmission of Nikkei/JGB Futures Markets between Japan and Singapore

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1997 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1008260409114
Publisher site
See Article on Publisher Site

Abstract

Using both daily and intraday data, this paper investigates the impact of different futures trading mechanisms employed by TSE/OSE (automated system with Saitori matching) in Japan and SIMEX (open outcry) in Singapore. In order to examine the relative performance, we compare interday return volatility and intraday price transmission of Nikkei/JGB futures between Japan and Singapore. Regarding Nikkei futures, we find no significant difference in the performance measurements between OSE and SIMEX. We find both OSE and SIMEX have significant higher variances and negative first-order autocorrelation at the open than at the close. We also find Granger causality in both directions of intermarket price transmission between OSE and SIMEX. Regarding JGB futures, empirical results are different between TSE and SIMEX. JGB futures on SIMEX has a lower volatility at the open and first-order autocorrelation at the open is not significant. In addition, we find unidirectional lead from Japan to Singapore in JGB futures. In conclusion, since Japanese trading system does not reduce return volatility and causes delay in the open, the benefit of Saitori matching is questionable. On the other hand, we find weak evidence that the Japanese trading system is more efficient in price reporting. There is no conclusive evidence that either SIMEX open outcry or TSE/OSE Saitori matching dominates the price discovery process.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Sep 29, 2004

References

  • Trading Mechanisms and Stock Returns: An Empirical Investigation
    Amihud, Y.; Mendelson, H.
  • Volatility, Efficiency, and Trading: Evidence from the Japanese Stock Market
    Amihud, Y.; Mendelson, H.
  • The interrelation of Stock and Options Market Trading-Volume Data
    Anthony, J. H.
  • Why Option Price Lag Stock Prices: A Trading-Based Explanation
    Chan, K.; Chung, Y. P.; Johnson, H.

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