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Determination of stock closing prices and hedging performance with stock indices futures

Authors


  • The authors would like to thank the editor of Accounting and Finance, Robert Faff, and anonymous referees for their insightful comments and suggestions that greatly improved the paper. All errors remain our own.

Abstract

This paper examines the impact of the determination of stock closing prices on futures price efficiency and hedging effectiveness with stock indices futures. The empirical results indicate that the increase in the length of the batching period of the stock closing call improves price efficiency in the futures closing prices and then enhances hedging performance in terms of the hedging risks. Additionally, from a utility-maximization point of view, hedging performance does not improve after the introduction of the 5 min stock closing call, which can be explained by an improvement in price efficiency at the futures market close.

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