Internationalization of futures markets: Lessons from China
Author(s)
Fan, JH
Fernandez-Perez, A
Indriawan, I
Todorova, N
Year published
2020
Metadata
Show full item recordAbstract
We examine the impact of internationalization on the quality of Chinese iron ore and PTA futures markets, by comparing the trading activities, costs and volatilities before and after the event. Using a difference-in-difference framework, we find that internationalization improves the market quality for PTA, while the opposite effect occurs with iron ore futures. This difference is caused in part by the activities of hedgers and speculators, while decreases in the iron ore market quality are largely explained by the erosion of locational arbitrage opportunities. Since the effects of internationalization differ across commodities, ...
View more >We examine the impact of internationalization on the quality of Chinese iron ore and PTA futures markets, by comparing the trading activities, costs and volatilities before and after the event. Using a difference-in-difference framework, we find that internationalization improves the market quality for PTA, while the opposite effect occurs with iron ore futures. This difference is caused in part by the activities of hedgers and speculators, while decreases in the iron ore market quality are largely explained by the erosion of locational arbitrage opportunities. Since the effects of internationalization differ across commodities, its success must be assessed case by case.
View less >
View more >We examine the impact of internationalization on the quality of Chinese iron ore and PTA futures markets, by comparing the trading activities, costs and volatilities before and after the event. Using a difference-in-difference framework, we find that internationalization improves the market quality for PTA, while the opposite effect occurs with iron ore futures. This difference is caused in part by the activities of hedgers and speculators, while decreases in the iron ore market quality are largely explained by the erosion of locational arbitrage opportunities. Since the effects of internationalization differ across commodities, its success must be assessed case by case.
View less >
Journal Title
Pacific-Basin Finance Journal
Volume
63
Subject
Banking, finance and investment