Price Discovery and Market Timing
—An Examination on Taiwan Top 50 ETF
作者: 林容竹 ：德明财经科技大学财务金融系;
Abstract: Exchange-Traded Funds (ETFs) make it possible to trade index in cash market to response new information, especially market-wide information, rapidly. This paper uniquely analyzes market prices and net asset values (NAVs) of Taiwan Top 50 ETF for eight years to observe the dissemination of information be- tween ETF and high-cap stock markets and thus to comprehend the preference of investors while responding to new events. The results indicate that there exists a cointegrated system between two price series and the vector error correction model could be applied to describe their dynamics. For the first half of the 8-year data period, the NAVs lead the market prices in an absolute manner showing that since the lower liquidity of Tai- wan 50 ETF, informed traders still prefer to react to information by trading high-cap stocks. For the second half data period while the trading volume of the ETF has more than doubled, this outcome changes. The price discovery function of Taiwan 50 ETF has greatly enhanced. The two prices lead each other. Such evidence supports “market liquidity hypothesis”. The market timing strategy based on the lead-lag results above has better performance in the former data period, yet in the latter period while Taiwan 50 ETF enhancing its price discovery function, the return of that strategy decreased, and the risk increased.
文章引用: 林容竹 (2012) 价格发现与择时策略—台湾50 ETF实证研究。 财富涌现与流转， 2， 48-55. doi: 10.12677/ETW.2012.23014
 I. Kawaller, P. Koch and T. Koch. The temporal price relationship between S&P 500 futures and the S&P 500 index. Journal of Finance, 1987, 42(5): 1309-1329.
 H. R. Stoll, R. E. Whaley. The dynamics of stock index and stock index futures returns. Journal of Financial and Quantitative Analysis, 1990, 25(1): 441-468.
 K. Chan. A further analysis of the lead-lag relationship between the cash market and stock index futures market. Review of Fi- nancial Studies, 1992, 5(1): 123-152.
 I. Kawaller, P. Koch and T. Koch. Intraday market be-havior and the extent of feedback between S&P 500 futures prices and the S&P 500 index. Journal of Financial Research, 1993, 14: 107- 121.
 A. Ghosh. Cointegration and error correction models: In-tertem- poral causality between index and futures prices. The Journal of Futures Markets, 1993, 13(2): 193-198.
 G. G. Booth, R. W. So and Y. Tse. Price discovery in the German equity index derivatives markets. The Journal of Futures Mar- kets, 1999, 19(6): 619-643.
 Q. C. Chu, G. W.-L. Hsieh and Y. Tse. Price discovery on the S&P 500 index markets: An analysis of spot index, index futures, and SPDRs. International Review of Financial-Analysis, 1999, 8(1): 21-34.
 Y. Tse. Price discovery and volatility spillovers in the DJIA index and futures markets. Journal of Futures Markets, 1999, 19(8): 911-930.
 Y. Tse. Index arbitrage with heterogenous inves-tors: A smooth transition error correction analysis. Journal of Banking and Fi- nance, 2001, 25(10): 1829-1855.
 B. Schlusche. Price formation in spot and futures markets: Ex- change traded funds vs. index futures. Journal of Derivatives, 2009, 17(2): 26-40.
 黄玉娟, 徐守德. 台股指数现货与期货市场价格动态关连性之研究[J]. 证券市场发展季刊, 1997, 9(3): 1-27.
 谢文良. 价格发现、信息传递与市场整合——台股期货市场之研究[J]. Journal of Financial Studies, 2002, 10(3): 1-31.
 Y. Chung. A transaction data test of stock index futures markets efficiency and index arbitrage profitability. Journal of Finance, 1991, 46(5): 1791-1809.
 J. Fleming, B. Ost-diek and R. E. Whaley. Trading costs and the relative rate of price discovery in stock, futures and options markets. The Journal of Futures Markets, 1996, 16(4): 353-387.
 J. A. Stephan, R. E. Whaley. Intraday price changes and trading volume relations in the stock and stock option markets. Journal of Finance, 1990, 45(1): 191-220.
 M. G. Kavussanos, I. D. Visvikis and P. D. Alexakis. The lead- lag relationship between cash and stock index futures in a new market. European Financial Management, 2008, 14(5): 1007- 1025.
 R. E. Engle, C. W. J. Granger. Cointegration and er-ror-correction: Representation, estimation, and testing. Econometrica, 1987, 55(2): 251-276.
 M. Wahab, M. Lashgari. Price dynamics and error correction in stock index and stock index futures markets: A cointegration ap- proach. The Journal of Futures Markets, 1993, 13(7): 711-742.
 C. A. Sims. Macroeconomics and reality. Econometrica, 1980, 48(1): 1-48.