Intraday and intraweek volatility patterns of Hang Seng index and index futures, and a test of the wait-to-trade hypothesis

Gordon Y N TANG*, David T.W. Lui

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)

Abstract

This paper examines the intraday and intraweek volatility patterns and tests the wait-to-trade hypothesis using 24-hour interday returns and 15-minute intraday returns on the Hang Seng Index (HSI) and Hang Seng Index Futures (HSIF). Empirical results show that for all weekdays, interday returns of HSIF are more volatile than those of HSI. An intraweek pattern exists at 2:45 PM for both markets with highest volatility on Monday. For the intraday returns, HSI is significantly more volatile than HSIF for the first 15-30 minutes after the markets open on all weekdays except Monday on which HSI is more volatile for the first 1 h. An intraweek pattern exists at 11:30 AM for both markets with lowest volatility on Thursday. Through an analysis on the intraday correlations between HSI and HSIF, we argue that the significantly larger open intraday volatility in HSI, which is inconsistent with the wait-to-trade hypothesis, is mainly caused by noise trading unrelated to information arrival.

Original languageEnglish
Pages (from-to)475-495
Number of pages21
JournalPacific Basin Finance Journal
Volume10
Issue number4
DOIs
Publication statusPublished - Sep 2002

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • Intraday
  • Intraweek
  • Stock index futures
  • Volatility patterns
  • Wait-to-trade hypothesis

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