This study investigates the trading activity of Chinese stock index futures, recently introduced at the open and close of the underlying trading. We document the impact of the underlying spot on the futures market liquidity as well as volatility as discussed in earlier works on market closure theory. Our empirical results support previous literature on the impact of the underlying, particularly during the open session, as a contagion effect, which is clearly at play. We find significant U-shaped patterns in liquidity factors and intraday volatility during open and close trades in the morning.
Wei, Wang Chun and Frino, Alex
"The Impact of Underlying Market Closure on Futures Market: Evidence from China,"
International Journal of Banking and Finance:
2, Article 2.
Available at: http://epublications.bond.edu.au/ijbf/vol9/iss2/2