An empirical analysis of the price discovery and the pricing bias in the KOSPI 200 stock index derivatives markets

Nam, Seung Oh; Oh, SeungYoung; Kim, Hyun Kyung; Kim, Byung Chun

doi:10.1016/j.irfa.2006.02.003

Cited by 21 publications

(9 citation statements)

References 18 publications

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“…The first approach focuses on the lead-lag relations on the prices among relevant markets; for example, Stoll and Whaley (1990), Chan (1992), Nam et al (2006) use multiple regressions to analyze the leadlag relations. Recently, Harris et al (1995) use error correction results to explain the transmission of price information about IBM in different stock exchanges.…”

Section: Methodology and Econometric Modelsmentioning

confidence: 99%

Information transmission and market interactions across the Atlantic — an empirical study on the natural gas market

Kao

Wan

2009

Energy Economics

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Section: Methodology and Econometric Modelsmentioning

confidence: 99%

Information transmission and market interactions across the Atlantic — an empirical study on the natural gas market

Kao

Wan

2009

Energy Economics

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“…futures lead the index and vice versa), although the futures' lead is stronger and longer than the index's lead (e.g. (Chiang and Fong, 2001, Nam et al, 2006, Ergün, 2009. While futures' lead can be up to 45 minutes (Kawaller et al, 1987), the index's lead does not exceed 15 minutes (Chan, 1992).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Although previous studies focus on the lead-lag correlation and the lead-lag time (e.g. (Fleming et al, 1996, Nam et al, 2006, Ergün, 2009, the lead-lag ratio (calculated by Equation 6) is necessary to provide a more comprehensive analysis of the lead-lag relationship. Let us consider the following example.…”

Section: = (4)mentioning

confidence: 99%

Ultra-high-frequency lead–lag relationship and information arrival

Dao

McGroarty

Urquhart

2018

Quantitative Finance

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To our knowledge, this paper is the first study on the effect of information arrival on the leadlag relationship among related spot instruments. Based on a large dataset of ultra-highfrequency transaction prices time-stamped to the millisecond of the S&P500 index and its two most liquid tracking ETFs, we find that their lead-lag relationship is affected by the rate of information arrival whose proxy is the unexpected trading volume of these instruments. Specifically, when information arrives, the leadership of the leading instrument may strengthen or weaken depending on whether the leading or lagging instrument responds to that information. An increase in the unexpected volume of the leader strengthens its leadership whereas an increase in the unexpected volume of the lagger weakens this leadership. In addition to the strength of leadership, an increase in the unexpected volume in response to information arrival may also have opposite effects on the lead-lag correlation coefficient depending on whether that volume increase belongs to the leader or the lagger. Finally, we find that sophisticated investors have a more significant effect on the lead-lag relationship than non-sophisticated ones.

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“…6 Considering other linked markets Fleming et al (1996) find that the futures market leads the options market. Nam et al (2006) explore the Korean market and document that both index futures and options lead the Korea Composite Stock Price Index 200 stock index. Similarly, Tse et al (2006) find that three different Dow Jones Industrial Average (DJIA) futures contracts contribute more to price discovery than the DJIA stock index.…”

Section: Literaturementioning

confidence: 99%