Volatility and Sluggishness across SGX MSCI Taiwan Index Futures and Cash Markets

While the law enabling a futures exchange to operate in Taiwan was enacted in March 1997, it was not until July 1998 that Taiwan Futures Exchange (TAIFEX) started trading its first futures contract. However, Singapore Exchange Derivatives Trading Limited (SGX-DT) launched the first exchange-traded stock index futures on Taiwan stocks on January 9, 1997. With its first-mover advantage and international financial strengths, SGX MSCI Taiwan stock index futures contracts and related trading arrangements provide equity market investors with excellent hedging, speculation and arbitrage opportunities never existed before. This paper uses earlier daily SGX-DT MSCI Taiwan cash index rates of return to investigate the influences of SGX-DT futures trading on Taiwan's cash and futures markets, and tests both the volatility and sluggishness on the cash market before and after stock index futures listing. It is found that the price of stock index futures is more volatile than the corresponding cash index. Furthermore, the introduction of stock index futures contracts has certain influence on the volatility and sluggishness of the cash market. Other institutional factors affecting index futures are also discussed.

並列關鍵字

Cash index ； Sluggishness ； Stock index futures ； Volatility

國際替代計量

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