The Hong Kong Futures Exchange (HKFE) published an educational article today that shows there's little difference in the price volatility of Hong Kong's benchmark stock market index - the Hang Seng Index (HSI) - between the expiration days and non-expiration days of HSI Futures. The article was written by Dr. Louis T.W. Cheng, Associate Professor of Finance in the Department of Business Studies at Hong Kong Polytechnic University and Kevin Cheng, the HKFE's Head of Economic Research.

The authors raise the following question in their title: "Is Hong Kong Stock Market More Volatile During the Expiration Day of HSI Futures?" Then, after a short introduction, they define volatility, review the HSI's volatility from January 1996 to November 1999 and provide an in-depth analysis of HSI volatility. The analysis includes two statistical tests and features several charts and tables.

In their conclusion, the researchers explain: "The empirical investigations of the HSI Futures expirations conducted in this study indicate that regardless of market conditions (volatile or non-volatile), statistical tests (T-test or Mann-Whitney U-test), or volatility measures (inter-day or intra-day), the difference between price volatility of the HSI between expiration days and non-expiration days is statistically insignificant." They add: "The perception that the HSI Futures expiration brings increased volatility to the stock market is wrong."

Today's article is the sixth in a series of HKFE educational articles aimed at enhancing public understanding of the futures markets and the important role they play in Hong Kong. A copy of the article accompanies this press release. Today's article can also be found on the Exchange's website: www.hkfe.com, under the News Centre's Special Reports section. Past education articles are also available on the website.

For further enquiries, please contact HKFE Corporate Communications: Miss Chiu Yeung on 2842 9322 or Miss Teresa Chan on 2842 9386.