Resiliency Ability of the Underlying Spot Market after the Introduction of Index Futures Contracts: Evidence from Hong Kong

Andy C.N. Kan
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Andy C.N. Kan: School of Business and Administration, The Open University of Hong Kong, Kowloon, Hong Kong, akan@ouhk.edu.hk

Journal of Emerging Market Finance, 2004, vol. 3, issue 3, 269-283

Abstract: This article focuses on the impact of the introduction of the Hang Seng Index (HSI) futures contracts on the resiliency ability of the underlying constituent stocks. The resiliency ability is defined as the market’s ability to execute market orders without large changes in the market price. The higher resiliency ability the market has, the better the market mechanism in evacuating large price changes owing to temporary order imbalances. This article employs a cross-sectional regression model to examine the impact of HSI futures trading on the resiliency ability of the underlying spot market. The results in this article indicate that the introduction of HSI futures contracts in Hong Kong increases the resiliency ability of the underlying constituent stocks.

Keywords: Constituent stocks; Hang Seng Index liquidity; resiliency ability (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:3:y:2004:i:3:p:269-283

DOI: 10.1177/097265270400300303

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