• The Korean Journal of Financial Management
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• v.26 no.3
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• pp.65-101
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• 2009

The effects of program trading halts system (sidecar) on information asymmetry of program trading stocks, index arbitrage stocks, and non-index arbitrage stocks in the Korean stock market are examined. Effective spread and number of program trade of each stock are used as proxy variables for information asymmetry. The main results are as follows; Firstly, we find that effective spreads of program trading stocks in the post-halt period decrease significantly following the halt period. This means that sidecar has the effect of reducing information asymmetry in the Korean stock market. Secondly, the mitigation effect of information asymmetry of program trading stocks works only in buy-program trading stocks, but not in sell-program trading stocks. Thirdly, the results show that there are no distinct differences for index arbitrage group and non-index arbitrage group surrounding the sidecar events. In other words, program trading halts system has a mitigating effect of information asymmetry in not only index arbitrage trading stocks but also non-index arbitrage stocks. Fourthly, this mitigation effect works only in buy-sample not in sell-sample like in program trading stocks. And lastly, the analyses result of number of program trade shows that number of program trade of almost of sample stocks increases after the sidecar events. This implies that the information asymmetry is not fully resolved during the halt period and the effect of news inducing sidecar is continuing after the event.

• Korea Trade Review
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• v.47 no.1
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• pp.181-198
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• 2022

This paper investigates the arbitrage effect by the covered interest parity (CIP) deviation, as well as other push or pull factor effect on capital inflows and ouflows in the Korean bond market, by utilizing OLS, TSLS, IRF and VDC in EC model. The sample period covers February 2002 to December 2020. It is found that, the swap basis reflecting the CIP deviations have the significant effects on both debt investment inflows and debt investment outflows. Also, it is found that, the Korean risk factors have decreasing effects on foreigner's investment in the Korean bonds, while the global risk factors have decreasing effects on Korean resident's investment in the foreign bonds.

• Journal of Korea Game Society
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• v.9 no.1
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• pp.33-41
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• 2009

In this paper we tried to figure out the types of real money trade of game items, and in order to study it we examined the Leveling System of MMORPG which is a perfect competitive market and how the closed structure of the game economy emits real money trade. The over production of the MMORPG's leveling system which is a perfect competitive market increases the amount of currency in circulation and then induces arbitrage due to mudfalation inside the game. In order to improve this problem, there are three methods of resolutions. The first is stabling the game economy by spontaneous order among the game users, but this is much local than the artificial order which takes a long time and evokes discrepance in MMORPG competitive characteristic. Secondly, legislational regulations from the government could improve the problem, but this method doesn't grant information or services as non-material labor in which it couldn't follow up the developing speed of the game market. Finally, delicate modulation among game items by the designer isn't possible to constrain them, and there is a limited reason that it couldn't control the increase of currency which is the main factor of arbitrage.

• The Journal of Fisheries Business Administration
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• v.48 no.4
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• pp.45-66
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• 2017

Although the main objective of Free Trade Agreements (FTA) is market integration among member countries, there are limited studies supporting this impact. Our study explores whether FTA has enhanced market integration between South Korea and its FTA partners, focusing on South Korea's fishery product import market. We investigate two research questions concerning FTA impacts: first, whether trade costs declined when South Korea imported fishery products from its FTA partners after the FTA; second, if the speed of the convergence of South Korea-its FTA partners'price differential of imported fishery products on trade costs result to occur more quickly after the FTA. To determine these outcomes, we utilize a Threshold Autoregressive Model covering the sample periods from January 2002 to April 2017. Our findings demonstrate the effects of FTA on market integration are different among FTA partners. FTA has enhanced the market integration between South Korea and Norway, Vietnam, and Spain, respectively, but not for others. Therefore, we find positive evidence of FTA on fishery import market integration between South Korea and Norway, Vietnam and Spain, respectively.

• Korea Trade Review
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• v.47 no.4
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• pp.177-195
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• 2022

This study analyzed the volatility spillover effect between international non-ferrous metal futures markets using the BEKK-GARCH model. Statistical data are futures price data of copper (CU), aluminum (AL), nickel (NI), tin (SN) from Shanghai Futures Exchange (SHFE) and London Metal Exchange (LME) from April 1, 2015 to December 31, 2021. Combining the research results, first, in the case of copper, aluminum, and nickel, it was found that there was a two-way volatility spillover effect between the Shanghai and London markets, and the international influence of the London market was greater. Second, in the case of the tin, it was found that the Shanghai market has a volatility spillover effect on the London market from stage I, and it is strengthened in stage II. Third, in the case of nickel, it was found that there was a two-way volatility spillover effect in the first stage, but in the second stage, the London market had a unidirectional volatility spillover effect with respect to the Shanghai market. This study confirmed that China's influence in the international non-ferrous metal futures market is gradually increasing. In addition, it suggested that international investors can engage in arbitrage and hedging using China's non-ferrous metal futures market.

• Communications for Statistical Applications and Methods
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• v.15 no.1
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• pp.117-124
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• 2008

The liquidity risk is defined as an additional risk in the market due to the timing and size of a trade. A recent work by Cetin et ai. (2003) proposes a rigorous mathematical model incorporating this liquidity risk into the arbitrage pricing theory. A practical problem arising in a real market application is an estimation problem of a liquidity cost. In this paper, we propose to estimate the liquidity cost function in the context of Cetin et al. (2003) using the constrained least square (LS) method, and illustrate it by analyzing the Kellogg company data.

• The Korean Journal of Financial Management
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• v.21 no.1
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• pp.205-229
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• 2004

The deviation from put-call parity condition may affect market prices since it provides an opportunity of arbitrage to many participants. This study uses the KOSPI200 index data and examines the interdependence among spot, futures, and options contracts by examining whether the deviations from the parity have significant roles in price formation. Whenever the parity condition is violated, the deviation tends to affect the prices significantly in most markets. The results show that positive values of deviation are associated with the fall of the prices in the spot and put option contracts and the rise of the call option premiums, thus decreasing the deviations. Also, the decreasing impact of deviations lasts for at Beast an hour in most markets. Futures prices, however, do not show clear relations with the deviations, which suggests the possibility that futures markets lead other markets.

• The Korean Journal of Financial Management
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• v.24 no.2
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• pp.41-79
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• 2007

This study examines the expiration-day effects of stock index futures and options in the Korean stock market. The so-called 'expiration-day effects', which are the abnormal stock price movements on derivatives expiration days, arise mainly from cash settlement. Index arbitragers have to bear the risk of their positions unless they liquidate their index stocks on the expiration day. If many arbitragers execute large buy or sell orders on the expiration day, abnormal trading volumes are likely to be observed. If a lot of arbitragers unwind positions in the same direction, temporary trading imbalances induce abnormal stock market volatility. By contrast, if some information arrives at market, the abnormal trading activity must be considered a normal process of price discovery. Stoll and Whaley(1987) investigated the aggregate price and volume effects of the S&P 500 index on the expiration day. In a related study, Stoll and Whaley(1990) found a similarity between the price behavior of stocks that are subject to program trading and of the stocks that are not. Thus far, there have been few studies about the expiration-day effects in the Korean stock market. While previous Korean studies use the KOSPI 200 index data, we analyze the price and trading volume behavior of individual stocks as well as the index. Analyzing individual stocks is important for two reasons. First, stock index is a market average. Consequently, it cannot reflect the behavior of many individual stocks. For example, if the expiration-day effects are mainly related to a specific group, it cannot be said that the expiration of derivatives itself destabilizes the stock market. Analyzing individual stocks enables us to investigate the scope of the expiration-day effects. Second, we can find the relationship between the firm characteristics and the expiration-day effects. For example, if the expiration-day effects exist in large stocks not belonging to the KOSPI 200 index, program trading may not be related to the expiration-day effects. The examination of individual stocks has led us to the cause of the expiration-day effects. Using the intraday data during the period May 3, 1996 through December 30, 2003, we first examine the price and volume effects of the KOSPI 200 and NON-KOSPI 200 index following the Stoll and Whaley(1987) methodology. We calculate the NON-KOSPI 200 index by using the returns and market capitalization of the KOSPI and KOSPI 200 index. In individual stocks, we divide KOSPI 200 stocks by size into three groups and match NON-KOSPI 200 stocks with KOSPI 200 stocks having the closest firm characteristics. We compare KOSPI 200 stocks with NON-KOSPI 200 stocks. To test whether the expiration-day effects are related to order imbalances or new information, we check price reversals on the next day. Finally, we perform a cross-sectional regression analysis to elaborate on the impact of the firm characteristics on price reversals. The main results seem to support the expiration-day effects, especially on stock index futures expiration days. The price behavior of stocks that are subject to program trading is shown to have price effects, abnormal return volatility, and large volumes during the last half hour of trading on the expiration day. Return reversals are also found in the KOSPI 200 index and stocks. However, there is no evidence of abnormal trading volume, or price reversals in the NON-KOSPI 200 index and stocks. The expiration-day effects are proportional to the size of stocks and the nearness to the settlement time. Since program trading is often said to be concentrated in high capitalization stocks, these results imply that the expiration-day effects seem to be associated with program trading and the settlement price determination procedure. In summary, the expiration-day effects in the Korean stock market do not exist in all stocks, but in large capitalization stocks belonging to the KOSPI 200 index. Additionally, the expiration-day effects in the Korean stock market are generally due, not to information, but to trading imbalances.