Expiration‐day effects on individual stocks and the overall market: Evidence from Taiwan

Hsieh, Wen-Liang

doi:10.1002/fut.20391

Cited by 17 publications

(9 citation statements)

References 17 publications

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“…In most cases, the authors suggest that we compare the values of these measures on expiration days as well as on appropriately defined control days. This stream of research originated in Stoll and Whaley (1986, 1987, 1991 and was used over the following years in Bollen and Whaley (1999), Alkebäck and Hagelin (2004), Morawska (2007), Hsieh (2009), Chay et al (2013) and Xu (2014). Our study is also based on this methodology.…”

Section: Measures Of Expiration-day Effectsmentioning

confidence: 99%

Impact of futures expiration on underlying stocks: intraday analysis for Warsaw Stock Exchange

Gurgul

Suliga

2019

Cent Eur J Oper Res

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Based on high-frequency data, this study is concerned with the effects of stock futures expirations on the spot market on the Warsaw Stock Exchange. The typical effects of futures expirations include the impact on the trading volume of the underlying asset, abnormally high volatility of the returns on expiration day, and price reversal after expiration. In line with observations of the effects for other markets, it can also be noticed that futures expiration is a source of rises in trading volume for the WSE. There is an observed significant abnormal trading volume and turnover of stocks that are underlying assets of futures as well as an increased volatility of these stocks' returns on expiration day. An additional analysis conducted during three sub-periods (around April 15, 2013, and May 31, 2015) checks whether the implementation of a new transaction system on the WSE and the changes in short-selling rules influenced the expiration-day effects. The results suggest that the implementation of a new regulation by the EU on the WSE concerning short selling in trading on stock exchanges had a significant impact on expiration-day effects.

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Section: Measures Of Expiration-day Effectsmentioning

confidence: 99%

Impact of futures expiration on underlying stocks: intraday analysis for Warsaw Stock Exchange

Gurgul

Suliga

2019

Cent Eur J Oper Res

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“…Their results show that the change of settlement price only shifted expiration-day effects, from the last to the first hour of the triple witching Friday. However, Chuang and Hseu (2008) and Hsieh (2009) report that expiration-day effects due to MSCI-TW futures expirations seem to become more pronounced following the adoption of a call auction closing procedure. A recent study by Hsieh and Ma (2009) lends support for this regulatory change.…”

Section: Literature Reviewmentioning

confidence: 99%

“…3 In 2002, the Taiwan Stock Exchange adopted a 5-minute closing call auction procedure, in the hope of more capability of absorbing large order imbalances, and therefore mitigating expiration-day effects. However, Chuang and Hseu (2008) and Hsieh (2009) report that expiration-day effects due to MSCI-TW futures expirations seem to become more pronounced following the adoption of a call auction closing procedure.…”

Section: Literature Reviewmentioning

confidence: 99%

Expiration‐Day Effects of Stock and Index Futures and Options in Sweden: The Return of the Witches

2013

Journal of Futures Markets

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Recently, the NASDAQ‐OMX Nordic Exchange announced a change of expiration day for the OMXS 30 index futures and options. The OMXS 30 index derivatives used to expire on the fourth Friday of the expiry month while derivatives on individual stocks expired on the third Friday. After the change, derivatives on both the index and individual stocks expire on the third Friday of the expiry month making the third Friday the “quadruple witching Friday” as stock futures, stock options, index futures, and index options expire simultaneously. This contractual change provides a unique opportunity to investigate its impact on expiration‐day effects. The results show that there is hardly any expiration‐day effect due to the derivatives' expirations before or after the contractual change, except the abnormally higher trading volumes at the stock derivatives' expirations before the change, and on the quadruple witching Fridays after the change. Most importantly, there is no significantly intensified abnormal volume, volatility, or price distortion effect due to the seemingly “extraordinary” change in the OMXS 30 index derivatives, despite the quadruple witching expirations after the change. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 34:868–882, 2014

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“…This “expiration day effect” has been a phenomenon common in the US, the UK, Germany, Canada, Spain, India, Taiwan, and Norway, and is used to account for the flurry of activity such as price reversals or excessive volatility of stock prices as traders of futures and options unwind their positions around their expiration days . Index arbitrage and price manipulation are seen as the culprits here (Stoll and Whaley, ; Alkebäck and Hagelin, ; Hsieh, ; Hsieh and Ma, ). Since price manipulation is difficult to prevent or detect and index arbitrage is likely to remain popular, plain vanilla futures will be subject to expiration day effects in the future, too.…”

Section: Introductionmentioning

confidence: 99%

“…(), Pope and Yadav (), Swindler et al . (), Schlag (), Vipul (), Illueca and Lafuente () and Hsieh ().…”

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Average Price Futures Contracts: Pricing, Characteristics, and Implications

Yoo

2015

Asia-Pac J of Fin Stud

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We define and price average index and currency futures, show how they reduce price manipulation, explore their features as financial instruments, and discuss their policy implications. They offer investors protection against price manipulation, effective hedging, and even rational speculation. The study shows that the mean and variance of the price of an arithmetic average futures contract are functions of its reference dates and that it can be flexibly designed to meet diverse hedging needs of investors. With these features, average price futures contracts can serve as a good complement to existing plain vanilla futures.

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Expiration‐day effects on individual stocks and the overall market: Evidence from Taiwan

Cited by 17 publications

References 17 publications

Impact of futures expiration on underlying stocks: intraday analysis for Warsaw Stock Exchange

Impact of futures expiration on underlying stocks: intraday analysis for Warsaw Stock Exchange

Expiration‐Day Effects of Stock and Index Futures and Options in Sweden: The Return of the Witches

Average Price Futures Contracts: Pricing, Characteristics, and Implications

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