Abstract
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.
Original language | English |
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Pages (from-to) | 238-259 |
Number of pages | 22 |
Journal | Journal of Futures Markets |
Volume | 39 |
Issue number | 2 |
DOIs | |
Publication status | Published - 2019 Feb 1 |
Bibliographical note
Publisher Copyright:© 2018 Wiley Periodicals, Inc.
All Science Journal Classification (ASJC) codes
- Accounting
- General Business,Management and Accounting
- Finance
- Economics and Econometrics