The spillover effects of the trading suspension of the treasury bond futures market in China

Pui Han, Winnie POON, Michael Arthur FIRTH, H. G. FUNG

Research output: Journal PublicationsJournal Article (refereed)peer-review

11 Citations (Scopus)

Abstract

The purpose of this study is to empirically investigate the equity market response to the suspension of trading in the Shanghai Treasury bond (T-bond) futures market in 1995. We examine the equity market because of its dominance in the Shanghai Stock Exchange. The equity market is worth over 60% of the total turnover in value (i.e. about 31.9 billion yuan in July, 1995). Specifically, we study the return and liquidity responses of both Shanghai and Shenzhen A and B shares. Results indicate that, while suspension of trading for the Shanghai Treasury-bond futures has a significant impact on the risk of the Shanghai B share returns only, it appears to improve the market liquidity of both A and B shares on the two exchanges.
Original languageEnglish
Pages (from-to)205-218
Number of pages14
JournalJournal of International Financial Markets, Institutions and Money
Volume8
Issue number2
DOIs
Publication statusPublished - 1 Jan 1998

Bibliographical note

The authors acknowledge the editorial assistance provided by Mr Peter Jackson of the Department of English at Lingnan College, Hong Kong. The authors thank Professor Ike Mathur and the anonymous referees for their helpful suggestions and constructive comments which helped to improve the paper.

Funding

Poon and Firth are grateful for a research grant from the Office of Research and Staff Development at Lingnan College, Hong Kong.

Keywords

  • Beta risk
  • Market liquidity
  • Spillover effects

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