TY - JOUR
T1 - Price-formation process of an emerging futures market
T2 - Call auction versus continuous auction
AU - Cheng, Mei Hsing
AU - Kang, Hsin Hong
N1 - Funding Information:
Mei-Hsing Cheng (daphne@mail.stut.edu.tw) is an assistant professor in the Department of International Business, Southern Taiwan University of Technology, and a Ph.D. candidate in the Graduate Institute of Business Administration, National Cheng Kung University. Hsin-Hong Kang (hhkang@mail.ncku.edu.tw) is a professor in the Department of Business Administration, National Cheng Kung University. The authors thank the National Science Council of the Republic of China, Taiwan, for financially supporting this research under contract no. NSC 92-2626-H-218-001.
Copyright:
Copyright 2011 Elsevier B.V., All rights reserved.
PY - 2007/1
Y1 - 2007/1
N2 - This study assesses the market qualities of alternative price-formation processes for an emerging futures market - the Taiwan futures market. In 2002, the price formation process in the market changed during the period of trade between call auction and continuous auction. The performances of call auction and continuous auction are compared using intraday data. Empirical results show that the market is more liquid, and volatility is slightly lower, under continuous auction than under call auction. Also, there is robust evidence that continuous auction improves informative efficiency. The study suggests that for an emerging futures market like that of Taiwan, continuous auction offers a better trading environment for futures trading. In addition to demonstrating the virtue of continuous auction, this study also finds that the asymmetry in volatility is related to the price formation process. The asymmetry effect exists under continuous auction, but not under call auction.
AB - This study assesses the market qualities of alternative price-formation processes for an emerging futures market - the Taiwan futures market. In 2002, the price formation process in the market changed during the period of trade between call auction and continuous auction. The performances of call auction and continuous auction are compared using intraday data. Empirical results show that the market is more liquid, and volatility is slightly lower, under continuous auction than under call auction. Also, there is robust evidence that continuous auction improves informative efficiency. The study suggests that for an emerging futures market like that of Taiwan, continuous auction offers a better trading environment for futures trading. In addition to demonstrating the virtue of continuous auction, this study also finds that the asymmetry in volatility is related to the price formation process. The asymmetry effect exists under continuous auction, but not under call auction.
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U2 - 10.2753/REE1540-496X430104
DO - 10.2753/REE1540-496X430104
M3 - Article
AN - SCOPUS:33846699278
SN - 1540-496X
VL - 43
SP - 74
EP - 97
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
IS - 1
ER -