Time Disparity and Price Discovery: The Effect of the U.S. Futures on Korean Gold Market

A B S T R A C TWe apply the pair sample method of Huang and Stoll (1996) to the Korea Exchange (KRX) so as to compare the trading costs of KOSPI and KOSDAQ stocks. The Korea Exchange have two trading places for listed stocks, which are KOSPI vs KOSDAQ, with the same trading mechanisms, i.e., the order-driven trading mechanism. Provided that we follow the pair sample method of Huang and Stoll (1996), we expect similar trading costs between KOSPI and KOSDAQ. One reason for this is that Huang and Stoll (1996) presumes that only trading mechanism under their pair sample does affect the difference in trading costs. Another reason is that KOSPI and KOSDAQ have the same trading mechanism. We found out that percent price impact costs are the same between KOSPI and KOSDAQ. Meanwhile, percent quoted and realized spreads show difference between KOSPI and KOSDAQ. In a further investigation of the intraday 30-minute time-interval trading costs, we found out that the average percent price impact costs were similar between KOSPI and KOSDAQ, while median percent price impact costs were different.

Section: A the Comparison Of Spread Measures Between Marketsmentioning

confidence: 99%

The Comparison of T rading Costs between Two Markets: KOSPI and KOSDAQ

Park¹

2018

Section: A the Comparison Of Spread Measures Between Marketsmentioning

confidence: 99%

Untitled

2018

We apply the pair sample method of Huang and Stoll (1996) to the Korea Exchange (KRX) so as to compare the trading costs of KOSPI and KOSDAQ stocks. The Korea Exchange have two trading places for listed stocks, which are KOSPI vs KOSDAQ, with the same trading mechanisms, i.e., the order-driven trading mechanism. Provided that we follow the pair sample method of Huang and Stoll (1996), we expect similar trading costs between KOSPI and KOSDAQ. One reason for this is that Huang and Stoll (1996) presumes that only trading mechanism under their pair sample does affect the difference in trading costs. Another reason is that KOSPI and KOSDAQ have the same trading mechanism. We found out that percent price impact costs are the same between KOSPI and KOSDAQ. Meanwhile, percent quoted and realized spreads show difference between KOSPI and KOSDAQ. In a further investigation of the intraday 30-minute time-interval trading costs, we found out that the average percent price impact costs were similar between KOSPI and KOSDAQ, while median percent price impact costs were different.

“…In emerging market there are relatively more constraints than matured market. Therefore, our study is meaningful in that the Korean financial markets are representative emerging market (Baek, et al, 2018). In this study, we compare three measurements of 12 asset-allocation strategies to a "1/N" portfolio using historical data generated by the Korean stock market mainly from January 2000 to December 2015.…”

Section: ⅰ Introductionmentioning

confidence: 99%

An Analysis of the Performance of the “1/N” Naïve Portfolio Strategy in Korean Stock Markets

Lee¹,

Kim²

2018

In this study, we compare three measurements of 12 asset-allocation strategies to a "1/N" portfolio using historical data of Korean stock markets, which is a representative emerging market, from January 2000 to December 2015. We find that in Korean stock markets the asset allocation strategies with short sale constraint have better performance than the "1/N" portfolio (i.e., high Sharpe ratios and high certainty-equivalent returns). While these optimal asset-allocation models have higher turnover than the "1/N" portfolio, the Sharpe ratio of short sale constraint is still higher than the "1/N" portfolio when we consider transaction costs. The results are surprising because no asset-allocation strategies are consistently dominant on "1/N" portfolio using US stock market data.