Analysis on the Effect of Price Discovery in Mini Derivatives : The Case of KOSPI200 Mini Options

2017 ◽  
Vol 25 (4) ◽  
pp. 623-656
Author(s):  
Woo–baik Lee
Keyword(s):  
Price Discovery ◽  
Investment Strategy ◽  
Vector Error Correction Model ◽  
Options Market ◽  
Information Share ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
The Empirical Analysis ◽  
Price Discovery Process

The KOSPI200 mini options market, introduced in July 2015, is a market where the trading multiplier is reduced to one-fifth of the regular options. This study shows that the price discovery effect of the original options and the mini options estimated by the vector error correction model (VECM) and Hasbrouck's information share (1995, 2003), based on the regular options-mini options arbitrage and the options-spot arbitrage. The results of the empirical analysis are summarized as follows. First, in the price discovery between the regular options and the mini options, regular options dominate mini options at a statistically significant level. Second, mini options tend to lead the spot, which is stronger than the regular options. Therefore, the regular options and the mini options show asymmetrical behavior in the price discovery process of the spot, opposite to each other and are interpreted as alternative derivatives in terms of investment strategy. Considering the immaturity of mini options market established during the sample period, the price discovery is efficient even though the trading activity in the mini options is lower than that of the regular options.

Price discovery and pairs trading potentials: the case of metals markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saji Thazhugal Govindan Nair
Keyword(s):  
Price Discovery ◽  
Price Transmission ◽  
Pairs Trading ◽  
Correction Model ◽  
Content Type ◽  
Vector Error Correction ◽  
Vector Error ◽  
Arbitrage Trading ◽  
Price Discovery Process ◽  
Practical Implications

Purpose This study aims to validate the “expectancy theory” of asset pricing and explores the price discovery process in metals futures markets. Design/methodology/approach This paper adopts the Johansen cointegration and vector error correction model approach to investigate the potentials of Pairs trading in the metals market during the period 2008–2019. Findings The results find the price movements in metal markets are not random walk and the current “futures” prices are the reasonable estimate of the “spot” metal prices in future. This study does not notice any significant differences in the price efficiency across metals markets, which signal the effects of limited idiosyncratic forces in price transmission. Practical implications The research suggests the covert use of metal futures to make gains from arbitrage trading. Originality/value The study emphasizes the potential of “pair trading” in commodity market context that is seldom discussed in academic papers.

THE CONTRIBUTION OF FOREIGN INVESTORS TO PRICE DISCOVERY IN THE INDONESIAN STOCK EXCHANGE

2013 ◽  
Vol 08 (02) ◽  
pp. 1350008
Author(s):  
JOSEPHINE SUDIMAN ◽  
DAVID EDMUND ALLEN ◽  
ROBERT JOHN POWELL
Keyword(s):  
Price Discovery ◽  
Stock Exchange ◽  
Weighted Average ◽  
Vector Error Correction Model ◽  
Average Price ◽  
Price Equilibrium ◽  
Foreign Investors ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error

This article examines the contribution of foreign investors to price discovery by applying a vector error correction model (VECM) to 30 frequently-traded stocks on the Indonesia Stock Exchange. We use the Lee and Ready (1991) rule to determine the initiator of a trade and compute the volume weighted average price (VWAP) for every 30 min interval during the period 2004–2006. There are three key findings. First, foreign investors are more aggressive than local investors in placing their orders yet foreigners do not trade as often as locals. Second, the profits of foreign investors are smaller than local investors. Third, foreign investors need to adjust their trade price at a higher magnitude to achieve price equilibrium, which indicates that the majority of price discovery occurs among local investors in the Indonesian market.

HUBUNGAN ANTARA CONSUMPTION ABROAD (MODA 2) DENGAN COMMERCIAL PRESENCE (MODA 3) DI SEKTOR JASA PARIWISATA INDONESIA

2016 ◽  
Vol 10 (1) ◽  
pp. 45-62
Author(s):  
Muhammad Fawaiq
Keyword(s):  
Vector Error Correction Model ◽  
Short Term ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Mode 2 ◽  
Variable Mode ◽  
Causality Relationship ◽  
Mode 3

Penelitian ini bertujuan untuk menganalisis hubungan antara Moda 2 dan Moda 3 dalam perdagangan internasional di sektor jasa pariwisata. Metode penelitian yang digunakan dalam penelitian ini adalah Panel Vector Error Correction Model (VECM) Granger. Data yang digunakan adalah data kedatangan wisatawan mancanegara dan Foreign Direct Investment (FDI) jasa hotel dan restoran tahun 1997-2014 di Bali, Jakarta, Kepulauan Riau dan Sumatera Utara. Daerah-daerah ini berkontribusi sebesar 81,26% dari total kedatangan wisatawan mancanegara di Indonesia dan 68% terhadap total FDI di jasa hotel dan restoran Indonesia. Hasil penelitian menunjukkan bahwa tidak terdapat hubungan kausalitas jangka pendek antara kedua variabel tetapi terdapat hubungan jangka panjang satu arah yaitu variabel Moda 3 dipengaruhi oleh variabel Moda 2. Hasil pengujian pada gabungan antara jangka panjang dan jangka pendek menujukkan bahwa variabel Moda 3 secara kuat dipengaruhi oleh variabel Moda 2. Dengan demikian diketahui bahwa semakin banyak jumlah wisatawan mancanegara yang datang ke Indonesia maka akan mendorong meningkatnya FDI di jasa hotel dan restoran, tetapi meningkatnya FDI di jasa tersebut tidak signifikan berpengaruh terhadap masuknya jumlah wisatawan mancanegara. This paper examines the relationship between Mode 2 and Mode 3 of international trade in tourism sector. The method used is the Panel Vector Error Correction Model (VECM) Granger. The data used in this study were the number of foreign tourist arrivals and the Foreign Direct Investment (FDI) in some hotels and restaurants during 1997-2014 in Bali, Jakarta, Riau Islands and Nort Sumatera.These regions contributed for 81.26% out of the total tourist arrivals in Indonesia and 68% of the total FDI in the services of hotels and restaurants Indonesia. The results using VECM Granger demonstrated that there was no short-term causality relationship between these two variables but they had a long-term causality relationship that the Moda 3 was affected by the variable mode 2. Test results on a combination of long-term and short-term showed that the variable mode 3 was strongly influenced by variable mode 2. Thus, it is known that the more foreign tourists coming to Indonesia, the more FDI we gained from the service of hotels and restaurants, but this increase does not significantly affect the number of foreign tourists.

Enhancing Economic Growth and Government Revenue Generation in Nigeria: The Role of Diaspora Remittances

2021 ◽  
pp. 003464462110256
Author(s):  
Dal Didia ◽  
Suleiman Tahir
Keyword(s):  
Economic Growth ◽  
Parameter Estimates ◽  
Gross Domestic Product Growth ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
The Empirical Analysis

Even though remittances constitute the second-largest source of foreign exchange for Nigeria, with a $24 billion inflow in 2018, its impact on economic growth remains unclear. This study, therefore, examined the short-run and long-run impact of remittances on the economic growth of Nigeria using the vector error correction model. Utilizing World Bank data covering 1990–2018, the empirical analysis revealed that remittances hurt economic growth in the short run while having no impact on economic growth in the long run. Our parameter estimates indicate that a 1% increase in remittances would result in a 0.9% decrease in the gross domestic product growth rate in the short run. One policy implication of this study is that Nigeria needs to devise policies and interventions that minimize the emigration of skilled professionals rather than depending on remittances that do not offset the losses to the economy due to brain drain.

Sign in / Sign up

Export Citation Format

Share Document