Overnight futures trading is available in USA, France and Australia. The overnight prices can be used to compute 24 h returns for two international markets over exactly the same time interval, even though the countries in which these markets operate are in completely different time zones. These synchronous returns make it possible to compute accurate daily correlation measures, which can for example be used for daily value-at-risk (VaR). Using Australian overnight index futures prices we find the correlation between USA and Australia to be about 55%, in stark contrast to near-zero correlation measures obtained from non-synchronous closing prices.

Correlation, Overnight futures trading, Synchronous prices, Value-at-risk
dx.doi.org/10.1016/S1042-4431(01)00056-7, hdl.handle.net/1765/66821
Journal of International Financial Markets, Institutions and Money
Erasmus Research Institute of Management

Fong, K, & Martens, M.P.E. (2002). Overnight futures trading: Now even Australia and US have common trading hours. Journal of International Financial Markets, Institutions and Money, 12(2), 167–182. doi:10.1016/S1042-4431(01)00056-7