Price discovery among SSE 50 Index-based spot, futures, and options markets

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This paper studies the contribution of newly launched SSE 50 Index-based options and futures to price discovery. We find that the derivatives markets quickly begin exhibiting price leadership over the corresponding spot market, despite their short history; the information share from both derivatives markets rose from 59.84% in mid-2015 to 84.6% in mid-2017. Using substantial regulation changes during the sample period, we test the trading cost hypothesis. The increases in derivatives transaction costs do not immediately impede their roles in price discovery. Findings suggest that in nascent and immature markets, investors’ trading experience matters more than trading costs.
Publisher
WILEY
Issue Date
2019-02
Language
English
Article Type
Article; Proceedings Paper
Citation

Journal of Futures Markets, v.39, no.2, pp.238 - 259

ISSN
0270-7314
DOI
10.1002/fut.21970
URI
http://hdl.handle.net/10203/250163
Appears in Collection
RIMS Journal Papers
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