Which Traders Contribute Most to Price Discovery? Evidence from the KOSPI 200 Options Market

Hankil Kang; Jangkoo Kang; Soonhee Lee

doi:10.1080/1540496X.2016.1196927

Which Traders Contribute Most to Price Discovery? Evidence from the KOSPI 200 Options Market

Hankil Kang, Jangkoo Kang, Soonhee Lee

School of Business Administration

Korea Advanced Institute of Science and Technology

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

We examine which group of investors—individuals, institutions, or foreigners—has more information about the true price process in the Korea Stock Price Index 200 (KOSPI 200) options market. Using the Hasbrouck (1995) information share and the Gonzalo and Granger (1995) common factor weight approach, we show that foreigners are the most informative about the efficient price process, and domestic institutional investors as well as individual investors have small contribution to price discovery. This result holds firmly, even after controlling for the effects of trading volume and the number of trades. Our empirical results suggest that foreigners are informed traders in the KOSPI 200 options market, consistent with the findings of Ahn, Kang, and Ryu (2008).

Original language	English
Pages (from-to)	2335-2347
Number of pages	13
Journal	Emerging Markets Finance and Trade
Volume	52
Issue number	10
DOIs	https://doi.org/10.1080/1540496X.2016.1196927
State	Published - 2 Oct 2016

Keywords

informed investor
options market
price discovery
vector error correction model

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10.1080/1540496X.2016.1196927

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title = "Which Traders Contribute Most to Price Discovery? Evidence from the KOSPI 200 Options Market",

abstract = "We examine which group of investors—individuals, institutions, or foreigners—has more information about the true price process in the Korea Stock Price Index 200 (KOSPI 200) options market. Using the Hasbrouck (1995) information share and the Gonzalo and Granger (1995) common factor weight approach, we show that foreigners are the most informative about the efficient price process, and domestic institutional investors as well as individual investors have small contribution to price discovery. This result holds firmly, even after controlling for the effects of trading volume and the number of trades. Our empirical results suggest that foreigners are informed traders in the KOSPI 200 options market, consistent with the findings of Ahn, Kang, and Ryu (2008).",

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AU - Lee, Soonhee

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AB - We examine which group of investors—individuals, institutions, or foreigners—has more information about the true price process in the Korea Stock Price Index 200 (KOSPI 200) options market. Using the Hasbrouck (1995) information share and the Gonzalo and Granger (1995) common factor weight approach, we show that foreigners are the most informative about the efficient price process, and domestic institutional investors as well as individual investors have small contribution to price discovery. This result holds firmly, even after controlling for the effects of trading volume and the number of trades. Our empirical results suggest that foreigners are informed traders in the KOSPI 200 options market, consistent with the findings of Ahn, Kang, and Ryu (2008).

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Which Traders Contribute Most to Price Discovery? Evidence from the KOSPI 200 Options Market

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