The Impact of H-Share Derivatives on the Underlying Equity Market
We investigate the impact of the sequential introduction of the Hang Seng Chinese Enterprise Stock Index (H-share Index) futures and options trading on the underlying Chinese equities listed in Hong Kong. Using both cross-sectional and time series analysis,we show that H-share index futures trading started in December,2003 is associated with an increase in spot market volatility and volume; while the subsequent H-share index options trading started six months later leads to a significant decline in spot market volatility and volume. We conjecture that the availability of H-share index futures induces additional speculating activities in the underlying equities,leading to the increase in volatility and volume of the underlying stocks. However,the subsequent introduction of H-share index options allows speculative and arbitrage activities using futures directly against options,which are much cheaper and more efficient than using the underlying stocks. Such a shift of trading activities naturally leads to a decline in volatility and volume in the underlying equities. We also find that futures and options trading does not change the liquidity of H-share constituent stocks,although futures trading does widen the quoted spread of H-share non-constituent stocks due to changes in price and trading volume and to a fixed price component in the spread. Our results shed light to securities exchanges in determining the timing of introducing futures and options and the corresponding impacts to the cash market.
Stock index derivatives Systematic risk Volatility Liquidity.
Steven Shuye Wang Wei Li Louis T.W.Cheng
School of Accounting and Finance,the Hong Kong Polytechnic University Kowloon,Hong Kong,China
国际会议
成都
英文
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）