Does Trading Method Alignment Improve Market Efficiency? Evidence From Taiwan Single‐Stock Futures Market

Chien‐Liang Chiu, Jui‐Cheng Hung, Chia‐Feng Chen and Chia‐Wei Hsieh

Journal of Futures Markets, 2025, vol. 45, issue 7, 802-816

Abstract: This study examines the impact of implementing an intraday continuous auction method in Taiwan's spot market on price discovery in the single‐stock futures (SSFs) market. The findings highlight the advantages of aligning the trading method of the underlying spot market with that of the SSF market, leading to improved price discovery in SSFs. A difference‐in‐differences analysis validates our findings. In addition, key factors such as spread, liquidity, and information intensity significantly influence cross‐sectional variation in price discovery. Notably, leverage—a fundamental feature of futures contracts—has a strong and positive effect on SSF price discovery following this alignment of trading methods.

Date: 2025
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https://doi.org/10.1002/fut.22588

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:45:y:2025:i:7:p:802-816

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