The Stabilization Effect of the KOSPI200 Nighttime Futures on the Korean Financial Market

Yeom, Myeong Hoon; Baek, Jae Seung; Ryu, Doo Jin

Korean Journal of Financial Studies 2013;42(1):105-131.
Published online February 28, 2013.

Myeong Hoon Yeom, Jae Seung Baek, Doo Jin Ryu

KOSPI200 야간선물이 시장안정에 미치는 영향에 관한 연구

염명훈, 백재승, 류두진

Abstract

This study examines whether the recently launched CME KOSPI200 nighttime futures contract contributes to the stability of the Korean financial market. By analyzing oneminute and daily data, we find that the KOSPI200 nighttime futures contract can be used as an effective and efficient hedging tool and that it definitely contributes to market stability. Our overall empirical findings are as follows. First, among other candidates, the KOSPI 200 nighttime futures contract shows the best performance in forecasting the stock index return of the next trading day. Second, compared with many overseas indices, the previous day high-low volatility of the nighttime futures shows better performance in predicting stock market volatility. Third, due to the price discovery function of the KOSPI200 nighttime futures contract, hedging strategy using the nighttime futures is quite effective.

Key Words: 가격발견,야간선물,헤지,CME,CME,Financial Stability,Hedge,KOSPI200,KOSPI200 Nighttime Futures,Price Discovery