The Influence of Information Arrival on Market Microstructure: Evidence from Three Related Markets

Posted: 26 Dec 1998

See all articles by Ike Mathur

Ike Mathur

Southern Illinois University - Department of Finance

Chen I. Lee

Texas Southern University

Abstract

This study examines the influence of information arrival on market microstructure for the MMI, NYSE, and S&P 500 stock index futures markets, with special emphasis on the effects of opening and closing of trading and expiration of contracts on price movements and trading activities. The results of the examination show that although the opening of the (MMI) futures market is associated with higher volatility, it is when the spot market opens that volatility reaches its highest level. Similarly, the closing of the futures markets, though more volatile, is not as volatile as the closing of the spot markets. Trading patterns, on the other hand, are distinct from volatility. For MMI, trading declines consistently after the close of the spot market. In contrast, the NYSE and S&P 500 continue to trade and reach a peak at the close of the futures markets. Expiration effects are evidenced by the increase in volatility and trading near the closing of the MMI and the spillover to the NYSE and S&P 500. In sharp contrast, the expirations of the NYSE and S&P 500 are only associated with decrease in trading, suggesting that efforts to dampen volatility by changing expiration days from Friday to Thursday and shifting settlement price from Friday close to Friday open, have been successful.

JEL Classification: G12, G14

Suggested Citation

Mathur, Ike and Lee, Chen I., The Influence of Information Arrival on Market Microstructure: Evidence from Three Related Markets. Available at SSRN: https://ssrn.com/abstract=142149

Ike Mathur (Contact Author)

Southern Illinois University - Department of Finance ( email )

Mailcode 4626
Carbondale, IL 62901-4626
United States
618-453-1421 (Phone)
618-453-5626 (Fax)

Chen I. Lee

Texas Southern University ( email )

3100 Cleburne Street
Houston, TX 77004
United States

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