ROLLOVER EFFECTS IN STOCK INDEX FUTURES CONTRACTS

10.6292/AFPF.2016.07.13

Bi-Juan Chang；Jow-Ran Chang；Mao-Wei Hung

Stock Index Futures (SIF) ； Rollover Effect ； Expiration Day Effect ； Cost-of-Carry Formula

Advances in Financial Planning and Forecasting

7期（2016 / 10 / 01）

287 - 316

英文

This paper proposes a new method for evaluating stock index futures contracts rolling returns with the rollover effect analysis. Due to the limited lifespan of futures contract, traditional return series construction may be distorted by the price jump and contract inconsistency problems. We amend it by replacing the rollover price of the nearest-to-maturity to the next-to-maturity price at the rollover day, and decomposing the total return to the rollover effect and the capital gain or loss. Three rolling points, the delivery day, the seventh day, and the first day of the expiration month, are considered. Differences between the actual and theoretical futures prices are also discussed. Convenience yields for the near close and next-to-maturity futures are also explored. We investigate S&P500, DAX, and TAIEX stock index futures, and find that with the risk-return and rollover effect analysis, rolling into the next contract on the delivery day is often a better choice. By the convergent paths of the convenience yields we observe that expiration day effects are very apparent in all three markets.

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