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Can night trading reduce price volatility? Evidence from China's corn and corn starch futures markets

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  • Weiyi Xia
  • Tao Xiong
  • Miao Li
Abstract
Since 2013, China's futures exchanges have implemented night trading for agricultural futures to reduce the overnight risk and price jump of futures products by extending trading hours. This study uses difference‐in‐differences (DID) to examine the impacts of night trading on daytime price volatility in corn and corn starch futures markets. On the basis of tick‐by‐tick data for these futures, we find that night trading has significantly reduced daytime volatility and contributed to price volatility stability in the corresponding futures market. Moreover, we make DID estimations for separate daytime sessions and find that the reduction of the daytime volatility takes place mainly during the first trading session. Robustness and placebo tests further support our main conclusions. Our results provide valuable guidance for futures exchanges and regulators seeking to formulate night trading policies for futures and options.

Suggested Citation

  • Weiyi Xia & Tao Xiong & Miao Li, 2024. "Can night trading reduce price volatility? Evidence from China's corn and corn starch futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(4), pages 585-604, April.
    • Handle: RePEc:wly:jfutmk:v:44:y:2024:i:4:p:585-604
    DOI: 10.1002/fut.22483
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    References listed on IDEAS

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