The Interaction of Asia-Pacific Futures Markets

This paper examines the intertemporal pricing behavior between the largest futures markets within the Pacific region with those in the UK and US. Both mean return and volatility transmissions between these markets are analyzed to understand the channels by which the international pricing mechanism functions. Results obtained from using a mixture of intraday and overnight returns show a preponderance of spillover effects between these markets. However, the economic and statistical significance of foreign market spillover effects to local overnight returns are much stronger than that of intraday returns. Furthermore, whilst most foreign market spillover effects originate in the US, Pacific market overnight returns, and in particular that of the Australian SPI futures market, can provide additional financial information useful for futures trading in non-US markets. * Corresponding author. Kingsley Fong. Address: School of Banking and Finance, University of New South Wales, Kensington, Australia 2052. Tel (612) 9385 5864. Fax (612) 9385 6347. Email: [email protected].