Intradaily relationship between information revelation and trading duration under market trends: the evidence of MSCI Taiwan stock index futures

Abstract

This paper investigates the duration dynamics and relationship between price volatility and durations under different market trends for the Morgan Stanley Taiwan stock index futures traded on the Singapore Exchange (SGX). It is found that conditional durations are related to durations and conditional expected durations as found in previous studies. The price volatility is related to duration related variables. Moreover, the intradaily price dynamics will vary according to the size of the observation interval, the size of price changes, and the market trend.

Notes

¹ For example, Glosten and Milgrom (1985) show that over time the information owned by informed traders will be released totally to the market. Foster and Viswanathan (1994) demonstrate that less informed traders and market makers can learn the true stock value from the trading of better informed traders.

² Easley and O’Hara (1992) argue that the sequence of trades provides information beyond the individual trade since event uncertainty is presented within the intensity of trades.

³ Since x _i = ψ _i ε _i , therefore x _i /ψ _i = ε _i represents the unexpected part of durations.

⁴ The intradaily database of the SGX contains trading prices and time stamps only. There are no volumes and quotes in this database.

⁵ A tick of MSCI Taiwan index futures is 0.1 index point. The direct transaction cost of MSCI Taiwan index futures on the SGX is around 0.1% per deal on average. Since the average of the sample data is 343.09 points, the price change has to be larger than 0.3 points to make up the transaction cost.

⁶ e.g. Wood et al. (1985) and Harris (1986), etc.