Intraday Price Discovery Process of the Nikkei 225 Futures Markets

This paper explores the intraday price discovery process among three futures in the Nikkei 225 futures markets: the regular Nikkei 225 futures traded on the Singapore Exchange (SGX) and the Osaka Stock Exchange (OSE) and Nikkei 225 mini futures using intraday transactions data. Specifically, using the Hasbrouck methodologies, information share of the three futures markets is estimated to compare the information efficiency among the Nikkei 225 futures markets. The empirical results show that more than half of the price discovery occurs in the SGX. Moreover, the launch of the Nikkei 225 mini futures decreases the SGX's information share by about 25% and shortens the time for price adjustment in arbitrage trading. These results suggest that price discovery tends to occur in the market with a smaller contract unit and minimum price fluctuation.杉原敏夫教授定年退職記念号In Honour of Prof. Toshio Sugihar