Author : Steven Shuye Wang
Publisher :
ISBN 13 :
Total Pages : 47 pages
Book Rating : 4.:/5 (129 download)
Book Synopsis The Impact of H-Share Derivatives on the Underlying Equity Market by : Steven Shuye Wang
Download or read book The Impact of H-Share Derivatives on the Underlying Equity Market written by Steven Shuye Wang and published by . This book was released on 2008 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We conjecture that an introduction of the Hong Kong Hang Seng Chinese Enterprise Stock Index (H-share Index) futures induces additional speculating activities in the underlying equities, leading to an increase in volatility and volume of the underlying stocks. Whereas, a subsequent introduction of H-share index options increases the level of informed trading and opens up opportunities for speculative and arbitrage activities using futures directly against options. These futures and options trading activities are much cheaper and more efficient than using the underlying stocks, leading to a significant decline in spot market volatility and volume. Our results are consistent with these arguments. We also find that derivative trading does not change the liquidity of H-share constituent stocks. Further tests based on the difference-in-difference approach confirm that the above findings are robust.