Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange
Autor(a) principal: | |
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Data de Publicação: | 2006 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Institucional do FGV (FGV Repositório Digital) |
Texto Completo: | http://hdl.handle.net/10438/892 |
Resumo: | This paper investigates the impact of price limits on the Brazilian futures markets using high frequency data. The aim is to identify whether there is a cool-off or a magnet effect. For that purpose, we examine a tick-by-tick data set that includes all contracts on the S˜ao Paulo stock index futures traded on the Brazilian Mercantile and Futures Exchange from January 1997 to December 1999. The results indicate that the conditional mean features a floor cool-off effect, whereas the conditional variance significantly increases as the price approaches the upper limit. We then build a trading strategy that accounts for the cool-off effect in the conditional mean so as to demonstrate that the latter has not only statistical, but also economic significance. The in-sample Sharpe ratio indeed is way superior to the buy-and-hold benchmarks we consider, whereas out-of-sample results evince similar performances. |
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Fernandes, MarceloRocha, Marco Aurélio dos SantosEscolas::EPGEFGV2008-05-13T15:39:29Z2008-05-13T15:39:29Z2006-11-010104-8910http://hdl.handle.net/10438/892This paper investigates the impact of price limits on the Brazilian futures markets using high frequency data. The aim is to identify whether there is a cool-off or a magnet effect. For that purpose, we examine a tick-by-tick data set that includes all contracts on the S˜ao Paulo stock index futures traded on the Brazilian Mercantile and Futures Exchange from January 1997 to December 1999. The results indicate that the conditional mean features a floor cool-off effect, whereas the conditional variance significantly increases as the price approaches the upper limit. We then build a trading strategy that accounts for the cool-off effect in the conditional mean so as to demonstrate that the latter has not only statistical, but also economic significance. The in-sample Sharpe ratio indeed is way superior to the buy-and-hold benchmarks we consider, whereas out-of-sample results evince similar performances.engEscola de Pós-Graduação em Economia da FGVEnsaios Econômicos;630Cool-off effectFutures marketsMagnet effectPrice limitsTransactions dataEconomiaEconomiaAre price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchangeinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articlereponame:Repositório Institucional do FGV (FGV Repositório Digital)instname:Fundação Getulio Vargas (FGV)instacron:FGVinfo:eu-repo/semantics/openAccessORIGINAL2153.pdfapplication/pdf263484https://repositorio.fgv.br/bitstreams/21720654-0cea-4e15-af7e-3d262bd0903e/download736d4d853e085de0698864ab405fe80bMD51TEXT2153.pdf.txt2153.pdf.txtExtracted texttext/plain64740https://repositorio.fgv.br/bitstreams/c014bb3d-25b1-41ab-9baa-145a8dac7ff0/download939eb26837e56e5b2cbe07c323507214MD56THUMBNAIL2153.pdf.jpg2153.pdf.jpgGenerated Thumbnailimage/jpeg3288https://repositorio.fgv.br/bitstreams/16c65e1f-17c0-45cf-ac74-1543ea6c291b/download96405f7c5b3f4ed00ee34c7d6dcb6323MD5710438/8922023-11-09 21:55:51.492open.accessoai:repositorio.fgv.br:10438/892https://repositorio.fgv.brRepositório InstitucionalPRIhttp://bibliotecadigital.fgv.br/dspace-oai/requestopendoar:39742023-11-09T21:55:51Repositório Institucional do FGV (FGV Repositório Digital) - Fundação Getulio Vargas (FGV)false |
dc.title.eng.fl_str_mv |
Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange |
title |
Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange |
spellingShingle |
Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange Fernandes, Marcelo Cool-off effect Futures markets Magnet effect Price limits Transactions data Economia Economia |
title_short |
Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange |
title_full |
Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange |
title_fullStr |
Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange |
title_full_unstemmed |
Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange |
title_sort |
Are price limits on futures markets that cool?: evidence from the Brazilian Mercantile and Futures Exchange |
author |
Fernandes, Marcelo |
author_facet |
Fernandes, Marcelo Rocha, Marco Aurélio dos Santos |
author_role |
author |
author2 |
Rocha, Marco Aurélio dos Santos |
author2_role |
author |
dc.contributor.unidadefgv.por.fl_str_mv |
Escolas::EPGE |
dc.contributor.affiliation.none.fl_str_mv |
FGV |
dc.contributor.author.fl_str_mv |
Fernandes, Marcelo Rocha, Marco Aurélio dos Santos |
dc.subject.por.fl_str_mv |
Cool-off effect Futures markets |
topic |
Cool-off effect Futures markets Magnet effect Price limits Transactions data Economia Economia |
dc.subject.eng.fl_str_mv |
Magnet effect Price limits Transactions data |
dc.subject.area.por.fl_str_mv |
Economia |
dc.subject.bibliodata.por.fl_str_mv |
Economia |
description |
This paper investigates the impact of price limits on the Brazilian futures markets using high frequency data. The aim is to identify whether there is a cool-off or a magnet effect. For that purpose, we examine a tick-by-tick data set that includes all contracts on the S˜ao Paulo stock index futures traded on the Brazilian Mercantile and Futures Exchange from January 1997 to December 1999. The results indicate that the conditional mean features a floor cool-off effect, whereas the conditional variance significantly increases as the price approaches the upper limit. We then build a trading strategy that accounts for the cool-off effect in the conditional mean so as to demonstrate that the latter has not only statistical, but also economic significance. The in-sample Sharpe ratio indeed is way superior to the buy-and-hold benchmarks we consider, whereas out-of-sample results evince similar performances. |
publishDate |
2006 |
dc.date.issued.fl_str_mv |
2006-11-01 |
dc.date.accessioned.fl_str_mv |
2008-05-13T15:39:29Z |
dc.date.available.fl_str_mv |
2008-05-13T15:39:29Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10438/892 |
dc.identifier.issn.none.fl_str_mv |
0104-8910 |
identifier_str_mv |
0104-8910 |
url |
http://hdl.handle.net/10438/892 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
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Ensaios Econômicos;630 |
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info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.publisher.none.fl_str_mv |
Escola de Pós-Graduação em Economia da FGV |
publisher.none.fl_str_mv |
Escola de Pós-Graduação em Economia da FGV |
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