Market efficiency around the clock some supporting evidence using foreign-based derivatives

Craig, A.; Dravid, Ajay; Richardson, Matthew

doi:10.1016/0304-405x(94)00822-i

Cited by 43 publications

(30 citation statements)

References 14 publications

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“…Regarding information transmission, Lee (1995) provides evidence that suggests that the US market contains information for predicting the Japanese market, but movements in the Japanese market do not contribute to changes in the US market. Craig et al (1995) find that Japanese Nikkei index-based futures that are traded in the US contain complete information about overnight returns in the Japanese market. Hamao et al (1990) document volatility spillover effects from the US market to the Japanese market.…”

Section: Introductionmentioning

confidence: 98%

Liquidity commonality and spillover in the US and Japanese markets: an intraday analysis using exchange-traded funds

Datar

Tse

2008

Rev Quant Finan Acc

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Section: Introductionmentioning

confidence: 98%

Liquidity commonality and spillover in the US and Japanese markets: an intraday analysis using exchange-traded funds

Datar

Tse

2008

Rev Quant Finan Acc

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“…Cyree and Winters (2001) Tinsley, and Tosini (1991), Craig, Dravid, and Richardson (1995) as well as Werner and Kleidon (1996). Andersen and Bollerslev (1998) is one of the few studies providing a characterization of intraday volatility patterns around the clock.…”

Section: Literature Reviewmentioning

confidence: 96%

Risk and Return Around the Clock

Fattinger

Ziegler

2015

SSRN Journal

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We investigate price discovery over the 24-hour trading day for equities, currencies, bonds, and commodities. Sizable price discovery occurs around the clock for most assets. For a given asset, intraday risk and return distributions are fairly similar, indicating a broadly constant risk-return-relationship during the day. Although the amount of price discovery varies significantly during the day and differs across assets, price discovery is generally efficient around the clock. Most assets do not exhibit the U-shaped intraday volatility pattern that has been documented for US equities, even if only main trading hours are considered. Intraday spikes in volatility are driven by the open or close of the market for the respective asset or other assets and by macroeconomic announcements. Both diffusion and jump risk are important drivers of intraday volatility patterns, and US macroeconomic news account for a sizable fraction of jump-driven volatility. For some -but not all -assets, the relationship between volume and volatility that can generally be observed during the trading day does not hold at the time of jumps, suggesting that traders anticipate large price moves at the time of scheduled announcements and market depth falls accordingly.

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“…WEBS cover 17 countries, and match the characteristics of the corresponding Morgan Stanley Capital International Indices. 9 Third, the investor is exposed to foreign exchange risk, because typically the NAVs of the funds are calculated by taking the stale prices of the assets multiplied by the corresponding exchange rate at 4pm. Investors, therefore, should hedge exchange-rate risk from close-to-close.…”

Section: Implementing the Trading Strategymentioning

confidence: 99%

“…While there is some questions about the quality of the flow data, which 9 There is an interesting difference between a quanto and WEBS-based hedge. Consider hedging Nikkei-linked assets.…”

Section: Existing Literaturementioning

confidence: 99%

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Stale Prices and Strategies for Trading Mutual Funds

Boudoukh

Richardson

Subrahmanyam

et al. 2002

Financial Analysts Journal

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We demonstrate that an institutional feature of numerous mutual funds, managing billions in assets, generates fund NAVs that reflect stale prices. Since, in many cases, investors can trade at these NAVs with limited transactions costs, there is an obvious trading opportunity. These opportunities are especially prevalent in international funds that buy Japanese or European equities.Simple, feasible strategies generate Sharpe ratios that are many times greater than the Sharpe ratio of the underlying fund. When implemented, the gains from these strategies are matched by offsetting losses incurred by buy-and-hold investors in these funds. In one particular example, we explore the consequences of trading between different Vanguard mutual funds. Compared to an equal-weighted buy-and-hold portfolio of international Vanguard funds with a 34% cumulative return, the strategy produces a 216% return while being in the stock market less than 20% of the time.

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Market efficiency around the clock some supporting evidence using foreign-based derivatives

Cited by 43 publications

References 14 publications

Liquidity commonality and spillover in the US and Japanese markets: an intraday analysis using exchange-traded funds

Liquidity commonality and spillover in the US and Japanese markets: an intraday analysis using exchange-traded funds

Risk and Return Around the Clock

Stale Prices and Strategies for Trading Mutual Funds

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