Price Discovery and Foreign Participation in Korea's Government Bond Cash and Futures Markets

Jaehun Choi, Hosung Lim, Rogelio V. Mercado, Cyn‐Young Park
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Abstract

This paper examines the impact of foreign participation in Korean Treasury Bond (KTB) futures and its role in price discovery for KTBs, using daily transactions data from the over-the-counter market for KTBs and from the Korea Exchange for the futures. Our analysis suggests that foreign trading in the KTB futures market leads the price discovery process for the underlying bonds. Empirical results show that foreigners’ daily net long positions in the futures market exert significant influence in KTB and KTB futures prices. We also find that it is the unexpected component of foreign investors’ net long futures positions that explains a significant share of the pricing effects, suggesting that how foreign trading responds to news carries additional information content.
韩国政府债券现货和期货市场的价格发现和外资参与
本文利用场外交易市场和韩国期货交易所的每日交易数据,研究了外国投资者参与韩国国债(KTB)期货的影响及其在KTB价格发现中的作用。我们的分析表明,KTB期货市场的外国交易主导了标的债券的价格发现过程。实证结果表明,外国人在期货市场的日净多头头寸对KTB和KTB期货价格有显著影响。我们还发现,外国投资者净多头期货头寸的意外组成部分解释了价格效应的重要份额,这表明外国交易对新闻的反应带有额外的信息内容。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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