Extended trading in Chinese index markets: Informed or uninformed?

• Extended trading in Chinese index futures has significant price discovery.
• Pre-open trades are more informed than post-close trades.
• The adverse-selection costs are the highest early in the pre-open trading.
• The results indicate the extent of information in the pre-open trading session.

The extension of trading hours for HS 300 index futures (China Shanghai Shenzhen 300 Stock Index Futures or Hushen 300 Index) in China provides an opportunity for examining whether extended futures trading has significant price discovery in exchange-traded fund (ETF) returns during regular trading hours. We find that pre-open and post-close futures trades significantly influence ETF returns. Extended futures trades contribute to price discovery, while maintaining the pricing efficiency of the ETF market. We also show that there are more informed trades during the pre-open trading session than during the post-close trading session in the futures market.