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Determinants of Nikkei futures mispricing in international markets: dividend clustering, currency risk and transaction costs

journal contribution
posted on 05.08.2019 by Jieye Qin, Christopher Green, Kavita Sirichand
This paper develops a comprehensive modified cost of carry model to study the mispricing of Nikkei 225 index futures contracts traded in Osaka, Singapore and Chicago based on a new 19-year dataset. Using this improved model, we find that dividend clustering, currency risk and transaction costs all play an essential role in the estimation of Nikkei mispricing. An exponential smooth transition autoregressive (ESTAR)-GARCH model is used to describe the international dynamics of Nikkei mispricing. The results indicate that generally mean reversion in mispricing and limits to arbitrage are driven more by transaction costs than by heterogeneous investors.

History

School

  • Business and Economics

Department

  • Economics

Published in

Journal of Futures Markets

Volume

39

Issue

10

Pages

1269 - 1300

Publisher

Wiley

Version

AM (Accepted Manuscript)

Rights holder

© Wiley Periodicals, Inc.

Publisher statement

This is the peer reviewed version of the following article: QIN, J., GREEN, C.J. and SIRICHAND, K., 2019. Determinants of Nikkei futures mispricing in international markets: dividend clustering, currency risk and transaction costs. Journal of Futures Markets, 39 (10), pp.1269-1300, which has been published in final form at https://doi.org/10.1002/fut.22038. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions

Acceptance date

01/06/2019

Publication date

2019-08-12

Copyright date

2019

ISSN

0270-7314

eISSN

1096-9934

Language

en

Depositor

Dr Kavita Sirichand

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