Traditional finance teaching on derivatives suggests that they can be utilized to reduce portfolio and market risk. Such outcome hinges on the assumption that derivatives are used as risk management tools and there is at least one true hedger in the transaction. In the absence of hedgers,...

We conduct efficiency test using the conventional method in Chordia, Roll, and Subrahmanyam (2005) and the wavelet analysis. For the FTSE-100 futures data from January 2001 through December 2004, both approaches identify that, conditional on order imbalance, it takes about 10 minutes for the...