Informed trading in the index option market: The case of KOSPI 200 options

Journal of Futures Markets - Tập 28 Số 12 - Trang 1118-1146 - 2008
Hee‐Joon Ahn1, Jangkoo Kang2, Doojin Ryu3
1 School of Business, Sungkyunkwan University, Seoul, Korea
2Graduate School of Finance, KAIST, Seoul, Korea
3Graduate School of Management, KAIST, Seoul, Korea

Tóm tắt

AbstractThis study examines if informed trading is present in the index option market by analyzing the KOSPI 200 options, the most actively traded derivative product in the world. The spread decomposition model developed by Madhavan, Richardson, and Roomans (1997) is utilized and the adverse‐selection cost component of the spread estimated by the model is then used as a proxy for the degree of informed trading. We find that adverse‐selection costs constitute a nontrivial portion of the transaction costs in index options trading. Approximately one‐third of the spread can be accounted for by information asymmetry costs. A further analysis indicates that adverse‐selection costs are positively related with option delta. Our regression analysis shows that option‐related variables are significantly associated with estimated information asymmetry costs, even when controlling for proxies for informed trading in the index futures market. Finally, we find the evidence that foreign investors are better informed compared to domestic investors and that domestic institutions have an edge in terms of information over domestic individuals. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:1118–1146, 2008

Từ khóa


Tài liệu tham khảo

10.1093/rfs/1.1.3

10.1111/j.1540-6261.1988.tb02614.x

Barber B. M. Lee Y. Liu Y. &Odean T.(2007).Just how much individual investors lose by trading? (working paper). University of California at Davis.

10.1111/0022-1082.00226

10.2469/faj.v31.n4.36

10.1016/S0304-405X(01)00063-0

10.1111/j.1540-6261.2004.00661.x

10.1093/rfs/15.4.1049

Chan K. C. Chang Y. &Lung P. P.(2005).Do options contribute to price discovery in emerging markets? (working paper). University of Dayton.

10.1016/0304-405X(93)90003-T

Cho Y. H. &Engle R. F.(1998).Modeling the impacts of market activity on bid–ask spreads in the option market (working paper). University of California San Diego.

10.1093/rfs/hhi028

10.2307/2330882

10.1086/503662

Dennis P. J. &Weston J. P.(2001).Who's informed? An analysis of stock ownership and informed trading (working paper). University of Virginia.

10.1111/j.1540-6261.2005.00747.x

10.1111/0022-1082.194060

10.1016/j.jfi.2005.07.003

10.1016/S0304-405X(00)00084-2

10.1093/rfs/hhm091

10.1093/rfs/4.4.623

10.1016/0304-405X(88)90034-7

10.1016/0304-405X(85)90044-3

Greene J. T.(1996).The impact of limit order executions on trading costs in New York Stock Exchange stocks (working paper). Georgia State University.

10.1016/S0304-405X(99)00044-6

10.1093/rfs/5.3.473

10.1111/0022-1082.00396

10.1093/rfs/13.3.585

10.1016/0304-405X(87)90004-3

10.1093/rfs/7.1.179

10.1093/rfs/10.4.995

10.1093/rfs/7.4.631

10.1016/j.finmar.2007.01.001

Kaul G. Nimalendran M. &Zhang D.(2004).Informed trading and option spreads (working paper). University of Michigan at Ann Arbor.

10.1016/0304-405X(94)00799-7

10.2307/2676221

Lin J.(1992).Order persistence adverse selection and gross profits earned by NYSE specialists (working paper). Louisiana State University.

10.1093/rfs/8.4.1153

10.1093/rfs/10.4.1035

10.1016/0304-405X(91)90039-M

10.1111/j.1540-6261.1982.tb03597.x

10.2307/1913610

10.1093/rfs/hhj024

10.1111/j.1540-6261.1984.tb03897.x

10.1016/j.finmar.2004.06.001

Seasholes M. S.(2000).Smart foreign traders in emerging markets (working paper). Harvard University Business School.

10.1111/j.1540-6261.1994.tb05152.x

10.1016/S0304-405X(97)00026-3

10.1111/j.1540-6261.1990.tb05087.x

10.1111/j.1540-6261.1989.tb02407.x

10.2307/2331010

10.1111/j.1540-6261.1990.tb02431.x

10.2307/2491358

Thông tin
Thông tin xuất bản

Journal of Futures Markets

Tập 28 Số 12

1118-1146

Thông tin tác giả