Can night trading reduce price volatility? Evidence from China's corn and corn starch futures markets

Weiyi Xia, Tao Xiong and Miao Li

Journal of Futures Markets, 2024, vol. 44, issue 4, 585-604

Abstract: Since 2013, China's futures exchanges have implemented night trading for agricultural futures to reduce the overnight risk and price jump of futures products by extending trading hours. This study uses difference‐in‐differences (DID) to examine the impacts of night trading on daytime price volatility in corn and corn starch futures markets. On the basis of tick‐by‐tick data for these futures, we find that night trading has significantly reduced daytime volatility and contributed to price volatility stability in the corresponding futures market. Moreover, we make DID estimations for separate daytime sessions and find that the reduction of the daytime volatility takes place mainly during the first trading session. Robustness and placebo tests further support our main conclusions. Our results provide valuable guidance for futures exchanges and regulators seeking to formulate night trading policies for futures and options.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:44:y:2024:i:4:p:585-604

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