Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.685610
Title: Stock index futures in Malaysia : does tick size reduction matters?
Author: Taunson, Jude W.
ISNI:       0000 0004 5915 6536
Awarding Body: Cranfield University
Current Institution: Cranfield University
Date of Award: 2015
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Abstract:
This thesis investigates the impact of tick size reduction on spot index liquidity and in turn on the inter-market pricing relationship between spot and futures indices. Three empirical chapters are presented. The first study investigates the impact on the spot index liquidity in emerging Malaysian capital market. To the best of our knowledge, we are first to investigate this issue. We find higher trading volume following tick size reduction. Further, we find lower mispricing between the spot and futures indices after the reduction. This is an indication that traders benefit from the lower tick sizes. In our second study, the price discovery role of the index futures is assessed. We find that the index futures adjust to equilibrium level ahead of its underlying. Interestingly, the spot index adjusts to equilibrium level at a higher speed in comparison to pre-reduction period. This implies that the lowering of tick sizes facilitates better incorporation of stock specific information. Altogether, the lowering of tick sizes seems to improve index futures price discovery role. In our third paper, we investigate the effectiveness of the index futures as a hedging instrument. We find evidence that the ability of the futures in reducing price risk is greatly enhanced due to the positive impacts of the lower tick sizes.
Supervisor: Poshakwale, Sunil Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.685610  DOI: Not available
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