The impact of individual investor trading on information asymmetry in the Korean stock market

This study examines the effects of investor attention on momentum in the Korean stock market. The results reveal significant negative momentum profits in stock groups with high investor attention (high turnover stocks), but insignificant results in those with low investor attention (low turnover stocks). Within high turnover stock groups, the winner portfolio has a declining price trend and insignificant performance, while the loser portfolio realizes significant positive performance through a substantial price increase in the future period. The momentum effect is highly dependent on the reversed performance of the loser portfolio. Second, the performance of the large overreaction stock group shows a more significant negative momentum effect compared to the low overreaction stock group, that is, the degree of overreaction significantly affects the momentum effect. Third, negative momentum profits are consistently observed regardless of the market dynamics. Specifically, more substantial and significant negative performance occurs in the transition market, where the market situation reverses between the past and future periods. Fourth, negative momentum profits are consistently identified even after controlling for the impact of common factors and volatility and liquidity into turnover. Our findings are qualitatively different from the characteristics of the traditional momentum effects generally reported in Western countries.

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The impact of MILA market-maker facility on volatility of the Colombian stock market

Revista Contabilidade & Finanças ◽

10.1590/1808-057x202112330 ◽

2021 ◽

Vol 32 (86) ◽

pp. 345-358

Author(s):

Benedicto Kulwizira Lukanima ◽

Yuli Paola Gómez-Bravo ◽

Luis Javier Sanchez-Barrios

Keyword(s):

Stock Market ◽

Information Asymmetry ◽

Risk Premium ◽

Stock Index ◽

Market Maker ◽

Policy Makers ◽

Portfolio Returns ◽

Volatility Persistence ◽

Two Samples ◽

The Impact

ABSTRACT In 2014, the Colombian Stock Exchange commenced the implementation of its market-maker facility (MMF), aiming at improving market efficiency. This paper examines the impact of the MMF program on three volatility-related aspects: volatility persistence, risk premium, and information asymmetry. This paper provides new insights about the anticipated outcomes of Mercados Integrados Latinoamericanos (MILA) reforms, specifically the MMF on the volatility of the Colombian stock market. This topic has not been fully addressed in the existing literature. This study, therefore, provides useful information for regulators and policy makers, in endeavors to address key issues raised during the World Economic Forum (WEF) of 2016. This paper poses a challenge to policy makers and stock market regulators in Colombia to revisit the reform program and address the factors limiting the effectiveness of market reforms. This paper provides justification for replicating the study to cover other MILA countries due to existing differences in some domestic market policies and structures. The paper employs conditional variance models for measuring volatility persistence, risk premia, and information asymmetry. The models are employed on the COLCAP stock index (Colombia) observed from January 17, 2008 to May 30, 2019. Observations are divided into two samples - pre- and post-MMF. This paper provides evidence of the impacts of the MMF reforms in the Colombian stock market. Specifically, the MMF seems to have an impact on the following aspects: (i) the magnitude in which current returns depend on previous returns has increased; (ii) investment portfolio returns, which are generally low, have declined after the MMF, leading to less risk compensation; (iii) the MMF does not seem to have affected the volatility of market returns and information asymmetry; (iv) volatility persistence increased in magnitude.

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The impact of closing mechanism changes: evidence from the Shanghai stock market

China Finance Review International ◽

10.1108/cfri-04-2020-0041 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Dan Ma ◽

Chunfeng Wang ◽

Zhenming Fang ◽

Ziwei Wang

Keyword(s):

Stock Market ◽

Market Quality ◽

Market Manipulation ◽

Trading Behavior ◽

Content Type ◽

Price Manipulation ◽

Closing Price ◽

Investor Trading ◽

The Impact ◽

Closing Mechanism

PurposeThe purpose of this paper is to empirically examine the impact of closing mechanism changes on market quality, investor trading behavior and market manipulation in the Shanghai stock market.Design/methodology/approachA dummy variable is constructed indicating whether the closing mechanism is call auction or continuous auction. Market quality is measured from aspects of liquidity, volatility and price continuity; investor trading behavior is scaled by order timing and order aggressiveness, and a price deviation indicator is the proxy of manipulation. Using panel regression, this study examines the impact of closing mechanism changes based on intraday transaction data from the Shanghai stock market.FindingsThe conclusions are as follows: First, market quality improves after the closing mechanism is reformed in terms of liquidity, volatility and price continuity. Second, order strategy changes significantly in the closing call market, and investors trade more aggressively in the continuous trading period before closing. Third, the closing call mechanism restrains the closing price manipulation and thus prompts an efficient closing price.Originality/valueThis paper examines the policy effects of closing mechanism changes from aspects of market quality, trading behavior and price manipulation, providing pieces of evidence for trading mechanism design and market supervision in emerging markets.

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