Observations of Market Expectation Behaviour in the Taiwan Stock Market
- Chiu Hsiao-Ya 0, Chen An-Pen, Sheng Chieh-Chung, Huang Yun-Hsuan Huang
- Corresponding Author
- Chiu Hsiao-Ya
0Institute of Information Management, University of National
Available Online October 2006.
- https://doi.org/10.2991/jcis.2006.184How to use a DOI?
- forecasting, market expectation, implied volatility, futures, probability space.
- This study adopts derivative pricing as an indicator of market expectations, with those results suggesting that general investors can use market expectations to predict the final settlement value of underlying assets. Most investment textbooks note that one of the major functions of futures is price discovery. Similarly, the implied volatility associated with option prices can be used to discover the volatility of the underlying asset. This study combines futures price and implied volatility to establish a probability space of market expectations regarding the final settlement value of the underlying asset, and verifies this probability space using empirical data from the Taiwan stock market. The verification results suggest that market expectations closely reflect the actual behavior of the final settlement value of the underlying asset, and thus provide a practical perspective on future price behavior. According to this study, investors can easily estimate underlying asset behavior based on the behavior of the related futures and options and without incurring significant measurement error, which can be helpful in risk management and planning investment strategies.
- Open Access
- This is an open access article distributed under the CC BY-NC license.
Cite this article
TY - CONF AU - Chiu Hsiao-Ya AU - Chen An-Pen AU - Sheng Chieh-Chung AU - Huang Yun-Hsuan Huang PY - 2006/10 DA - 2006/10 TI - Observations of Market Expectation Behaviour in the Taiwan Stock Market BT - 9th Joint International Conference on Information Sciences (JCIS-06) PB - Atlantis Press UR - https://doi.org/10.2991/jcis.2006.184 DO - https://doi.org/10.2991/jcis.2006.184 ID - Hsiao-Ya2006/10 ER -