The contribution of a satellite market to price discovery: Evidence from the Singapore exchange

Journal of Futures Markets - Tập 24 Số 10 - Trang 981-1004 - 2004
Vicentiu Covrig1, David K. Ding2, Buen Sin Low2
1School of Business and Economics, California State University, Northridge, California
2Nanyang Business School, Nanyang Technological University, Singapore

Tóm tắt

AbstractThe Singapore Exchange (SGX), a small satellite market, successfully competes with a large home market, the Osaka Securities Exchange (OSE), in trading the Nikkei 225 futures index. In this paper, we investigate the contribution of the SGX to price discovery and shed light on the reasons for its continued success. Evidence is provided from information revelation and price discovery of three competing but informationally linked markets of the Nikkei 225 index—domestic spot (Tokyo Stock Exchange), domestic futures (OSE), and foreign futures (SGX), which represents the satellite market. Overall, the futures market contributes 77% to price discovery, with the satellite market contributing 42% of the futures and 33% of the total price discovery. These figures, surprisingly, far exceed the satellite market's share of trading volume. Support is provided for the extended trading hours on the SGX for three of the four non‐overlapping trading sub‐periods. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:981–1004, 2004

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Journal of Futures Markets

Tập 24 Số 10

981-1004

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