bluuebunny/crossref_metadata_2025 huggingface dataset:
Test on the Profit of Pairs Trading Strategy Using KOSPI200 Regular and Mini Options
Authors: Lee Woo–baik
Published: September 2020

The KOSPI200 mini option introduced in July 2015 is the derivative of which trading multiplier is reduced to one-fifth of the regular options. This study explored the pairs trading opportunities arising from the price spread between the KOSPI200 regular options and the mini options during the sample period from August 2015 to March 2016 and measured the profits of pairs trading. The main results are summarized as follows. First, the most frequency of pairs trading with high profit was observed for in-the-money options. On the other hands, the frequency of pairs trading opportunities is low and the profit is relatively small for out-of (at)-the money options. Second, for in-the-money options, arbitrage opportunities were captured every three minutes on an average, but the elapsed time between arbitrage opportunity opportunities on out-of-the money options exceeded 10 minutes on average. Third, pairs trading opportunities occur uniformly throughout the day, but profit tends to increase in the afternoon than in the morning. This indicates that price efficiency in options market deteriorates and profit of arbitrage trading with price disparity is higher in the afternoon than that of the morning trading. In addition, the profitability of pairs trading with low liquidity was cross-sectionally higher than those with high liquidity.
Investor Attention and Expected Return
Authors: Lee Eun Jung , Lee Yu Kyung , Chae Joon
Published: September 2020

In this paper, we analyze the effect of investor attention level on expected return in the Korean stock market by investor type. We find that the risk-adjusted excess returns in the next period are significantly higher when the institutional and foreign investor’s attention is high. In other words, investment strategies that buy stocks in higher attention groups and sell those in lower attention groups provide significant excess returns. This result is in contrast to the argument that the market operates more competitively and moves more efficiently as the number of investors increases due to the increased investor attention. Next, we examine how the degree of attention of institutional, individual, and foreign investors affects each other. The analysis reveals that the attention of individual investors affects the attention of institutional investors in the next period, and vice versa. In addition, as a result of group analysis according to the size of company and stock price, we find that the investor's attention affects the market differently depending on the type of investors and stock price level.
The Effects of Estimation Methods of Stock Price Volatility on VaR
Authors: Cho Dam
Published: September 2020

I perform the backtesting of 10-day VaR's using daily returns of KOSPI 200 from January 1994 to December 1993 (2,692 days). The seven volatility measures are calculated with the last 300-day data; those are the historical standard deviations, the exponentially weighted moving average (EWMA) volatilities, the standard deviations from GARCH (1, 1) and three measures to consider autocorrelations in daily returns. The seven types of ten-day VaR’s at 1 % and 5% significance levels are estimated from these six volatility measures and 1 or 5 percentile of the last 300-day historical distributions I use the likelihood ratio (LR) test statistics to test the expected frequency and/or independence of the occurrence of extreme losses, that is, the losses which exceed the VaR values. The LR statistics for the expected frequence show that the VaR measure based on the historical standard deviations is the best one, but the LR statistics for independence reject the usefulness of ali the VaR measures.
A Comparative Analysis of Hedging Effectiveness of Won/Dollar Futures and NDF Contracts
Authors: Yun Won Cheol , An Hyun Jin
Published: September 2020

This study compares the hedging effectiveness of domestic won/dollar futures and foreign non-deferable forward (NDF) contracts. We use an ex ante analysis based on out-of-sample data. In addition, the analysis is based on the inventory hedging scenario, adopted in most of previous studies. We estimated hedge ratios by using the various method of 1 : 1 hedging, ordinary least squares (OLS), and error correction model (ECM). The hedging period is expanded to include one to twelve months‘ In every aspect, the hedging effectiveness of won/dollar futures contract turns out to be better than that of NDF contract. However, the differences are not statistically significant at 10% level. This res비t stems from the fact that there exists a high correlation between spot exchange rate and futures or forward exchange rates, implying an evidence of co-movement between them.
Estimating and Forecasting the Term Structure of Korea Markets Using the Nelson-Siegel Model
Authors: Lee Joon Haeng
Published: September 2020

This paper estimates and forecasts yield curve of korea bond market using a three factor term structure model based on the Nelson-Siegel model. The Nelson-Siegel model is in-terpreted as a model of level, slope and curvature and has the flexibility required to match the changing shape of the yield curve. To estimate this model, we use the two-step estima-tion procedure as in Diebold and Li. Estimation results show our model is Quite flexible and gives a very good fit to data.

To see the forecasting ability of our model, we compare the RMSEs (root mean square error) of our model to random walk (RW) model and principal component model for out-of sample period as well as in-sample period. we find that our model has better forecasting performances over principal component model but shows slight edge over RW model especially for long run forecasting period. Considering that it is difficult for any model to show better forecasting ability over the RW model in out-of-sample period, results suggest that our model is useful for practitioners to forecast yields curve dynamics.
An Efficient Numerical Method for Pricing Levy Option Models : With Variance Gamma Process
Authors: Ku Bon Il , Eom Young Ho , Jang Woon Wook
Published: September 2020

We study an efficient numerical method for pricing European options when the dynamics of the underlying asset are described by Levy processes. In this case. we can write a characteristic function solution for a specific Levy option model and then take its inversion numerically. Specifically we use Variance Gamma process as an example of Levy option model and consider various characteristic function representation forms of European option price such as Carr and Madan (1999), Bakshi and Madan (2000). and Lewis (2001). Fast Fourier Transform method is applied to solve the numerical inversion problem with parameters for the KOSPI 200 options data. After analysing the problems in the FFT method, we propose alternative numerical inversion method, Gaussian Quadrature. This paper reports that Gaussian Quadrature numerical inversion method with the representation form of Bakshi & Madan (2000) is more efficient and accurate than other alternatives considered in this paper.
A Study on the Return Dynamics using the Implied Information
Authors: Kim Moo Sung , Kang Tae Hun
Published: September 2020

This article empirically analyzes some properties by all one-dimensional diffusion option models by using the martingale restriction test and examines the systematic risk factors Implied In return dynamics of KOSPI 200 index options. We find that the martingale restriction under one-dimensional diffusion option model is strongly rejected by the data because of the negative volatility risk premium. Therefore options are not redundant securities, nor monotonically increasing (decreasing) in the underlying asset price and also option prices are not perfectly correlated with each other and with the underlying asset. And under the non-complete of the market. the informational led-lag relationship between the stock indices and the stock index options exist.
Implied Risk Preferences from Option Prices: Evidence from KOSPI 200 Index Options
Authors: Kang Byung Jin , Kim Tong Suk , Yoon Sun Joong
Published: September 2020

In this paper, we investigated the risk averse ness of KOSPI 200 option investors with very flexible risk preference structure. Contrary to the most of previous research either assuming a time-invariant underlying asset return distribution or assuming a well-known functional form for the underlying utility functions. we directly assume functional forms for Investors’risk aversion functions. With the direct specification on the risk aversion functions themselves. we can avoid the possibility 이 suffering from Internal inconsistency and of obtaining misleading risk aversion functions. From our empirical results using KOSPI 200 Index option prices from 1997 through 2006. we discovered that the investors' relative risk aversions exhibit ‘sharply decreasing' across wealth. In addition, our Implied subjective PDFs are found to more accurately forecast the distribution of realization than both the risk neutral PDFs and implied subjective PDFs from previous methods. For the robustness of our empirical results, we test the effects of estimation errors In the expected risk premium, and of financial crisis in the late of 1990s.
A Study on the Market Price of Weather Risk in Pricing Weather Derivatives
Authors: Bae Kwang-Il , Choung Jin Hee
Published: September 2020

The weather largely affects economic activity, and thus, companies vulnerable to weather risk need to plan ahead to cope with unexpected weather changes, just as they do for changes in interest rates, oil prices, or foreign exchange rates to stabilize their earning stream. Weather derivatives can be a useful tool for weather risk management.

This paper focuses on pricing one of the most popular weather derivatives -HDD/CDD options- and estimating the market price of weather risk (MPR). Historical data are used to construct the stochastic process of temperature, while the current market prices of Chicago and New York HDD futures options are used to extract the implied MPR. The Monte-Carlo Simulation Method is proposed to estimate the price of weather derivatives numerically. In addition, the approximate closed form formula for the options is provided modifying the Alaton, Djehiche, and Stillberg (2002) model. Finally, option price sensitivity to changes in MPR is analyzed to show the important role of the MPR in the weather option pricing model.
The Volatility Risk Premium in the KOSPI200 Index Options
Authors: Park Hyoung-Jin
Published: September 2020

This study examines whether the volatility risk premium is reflected on the prices of the KOSPI200 index options. By applying the empirical method of Bakshi and Kapadia (2003), we analyze the performance of delta-hedging strategy in the KOSPI200 index market. They showed the existence of the negative volatility risk premium in the S&P 500 index options as well as derived theoretical positive relationship between the volatility risk premium and delta-hedging gains. However, in the results of this study, contrary to those in the S&P 500 index options market, we do not observe the volatility risk premium. Delta-hedged gains of ATM options are not significantly negative. Delta-hedged gains are not more negative as historical volatility increases and as options' vega and remaining maturity increase. However, the notable finding of this study is that delta-hedged gains of OTM options and put options are negative and signigicant. This results can be caused by the phenomenon of overpriced puts or by market microstructure factors, such as relatively wide bid-ask spread and high tick size. In a simple examination of comparison between changes in traded option prices and changes in the Black-Scholes option prices during delta-hedging period, negative delta-hedged gains seem to be attributed to too small changes in call option prices and too large changes in put option prices. In conclusion, by analyzing the delta-hedged gains, the volatility risk risk premium seems not be observed in the KOSPI200 index options market.
Understanding the Impact of Monetary Policy in Korea using a Macro-Finance Term Structure Model with
Authors: Jang Woon Wook , Hahn Jaehoon
Published: September 2020

This paper examines the interaction between monetary policy and the macroeconomy using a macro-finance term structure model of Joslin, Priebsch, and Singleton (2012), in which macroeconomic risks are not assumed to be spanned by information about the shape of the yield curve. For model estimation, we apply the Kalman filter to a large number of macroeconomic time series data grouped into output, inflation, and market stress categories and extract three common factors. For the factors determining the shape of the yield curve, we use the call rate, the spread between 10-year government bond yield and the call rate, and a combination of the call rate, 2- and 10-year government bond yields as proxies for the level, slope, and curvature factors. We interpret the call rate as a proxy for both the short rate and the instrument of monetary policy. Empirical results show that the macroeconomic factors have a significant impact on the risk premium associated with monetary policy shocks. Furthermore, we find that monetary policy shocks increase the term premium, which in turn affects the factors determining the yield curve, and such effects on the shape of the yield curve feeds back into the macroeconomic factors. Taken together, empirical findings in this paper can be interpreted as evidence supporting the term premium channel (Ferman, 2011) of monetary policy transmission mechanism.
An Event Study on the Effects of North Korea Risks on South Korea‘s Stock Market
Authors: Lee Inho , Yoo Shiyong
Published: September 2020

There have always been North Korea Risks in South Korea stock market since its opening. Some studies have concluded that it does not have a substantial impact on South Korea’s economy due to chronic geopolitical risks, while others have argued it has had an impact. However, in light of the Efficient Market Hypothesis (EMH) it can be argued that both opinions view that information about North Korea Risks affects stock markets and that stock prices react to it. This study analyzed the effects of North Korea Risks on South Korea’s stock market using event study methodology empirically, and it tested the semi-strong EMH-a market in which prices always fully reflect available information. The research results are following:

First of all, North Korea Risks have an impact on South Korea’s stock market and the data was statistically significant. In particular, stock market already reflected information about the forewarned events like nuclear test. However, market also responded to information about sudden events such as the impact of Kim Jung-il’s death on the South-North economic cooperation stock. Portfolio analysis demonstrated that small capital stocks were affected more than large caps. These results cannot reject the EMH.

Also, estimates of market model and that of Fama-French three-factor model did not show a statistically significant difference in different verification. There was no statistically significant difference between growth and value stock in large caps portfolio either. However, there was a statistically significant difference between defense stock and South-North economic cooperation stock, small caps and big caps, and weighted average and simple average.

The significance of this study lies in that it conducted the event study by variety estimation model with objective standards for selecting events when measuring the effect of North Korea Risks.
A Study on the Value of Default (Option) of Purchase Contract
Authors: Choi Jongyeon
Published: September 2020

This paper start from the question that value of right which is arose from real asset trade. First, organizing option portfolio using this right, then we investigate the correlation about real assets and contracted prices. The results are as follows. When a market is in equilibrium, the call-option value which is owned by seller is greater than the put-option value which is owned by buyer. As a result, present value of contract price is lower than the true value of the asset. Furthermore, this phenomenon is getting deepen when volatility of real estate is greater, expiration date is longer and interest rate is higher.
Private Information and Trading Behavior: KOSPI200 Futures Markets
Authors: Kim Taewoo Daniel , Ohk Kiyool
Published: September 2020

The study examines whether the trader’s order imbalance for KOSPI200 futures can explain their informativeness. I use daily positions of various types of futures market participants such as foreign investors, institution investors, and individual investors to identify informed traders. The positions of foreign investors, institution investors and individual investors are correlated with returns in KOSPI200 futures markets, but there is some debate as the interpretation of such a relationship. I find that the foreign investors’ position is informative to investors, supporting the private information view. In terms of trader’s behavior, foreign traders follow contrarian strategies and trade with higher information than individual and institutional traders, who trade as momentum. Also, I considering regime switching effects in this frameworks. In threshold regression models, I found a different behavior during futures return expansions and contractions or volatility expansions and contractions.
Short Selling and Price Pressures in the Korean Stock Market
Authors: Rhee Yeongseop , Hahn Sang Buhm
Published: September 2020

This paper examines short-selling activity focusing on its behavior during non-normal times of occasional excesses in the Korean stock market. Using the methodology explained by Brunnermeier and Pederson (2005) and Shkilko et al. (2009; 2012), we first examine whether short-selling is predatory on those event days of large price reversals. Overall there is little predatory abnormal short-selling in the pre-rebound phase and we can observe active contrarian short-selling in the post-rebound phase. When we compared aggressiveness between short-selling and non-short-selling using order imbalance variables, we found that non-short selling is much more aggressive than short selling in the Korean stock market. From the observation of market liquidity measured by quoted spreads, we could find that market liquidity is somewhat limited during price decline stages while it slightly improves during price reversal phases. Also, using dynamic panel model, we test the influences of those variables on stock price changes and disaggregate the compound effect of short-selling reflected in trading volume itself into differentiated ones not only through pure trading channel but also through other complicated channels such as market sentiment change. Main findings from the regression results are as follows : In the Korean stock market, short sellers seem to behave as a contrarian trader rather than a momentum trader; seller-initiated aggressive trading, whether it is by short-selling or non-short-selling, leads to negative order imbalance and price decline; market liquidity is limited by short-selling and further pressure on price decline is added in the pre-rebound stage; and stock prices are affected not only through pure selling (buying) channel but also through other channels in the Korean stock market.
The Effect of Information Asymmetry and CRA’s Reputation on Bond Yield Spread
Authors: Jung Yun Yeong , Park Rae Soo
Published: September 2020

This paper investigates the effects of information asymmetry and Credit Rating Agency's reputation on bond yield spread, which is caused by the split bond rating of CRAs. For analysis, We do multivariate analysis, using bond rating and bond yield spread data in Korea from 2004 to 2015. The empirical results are as follows.

First, we examines whether information asymmetry affects the bond yield spread. using split rating data. As a result, the information asymmetry measured by split rating variable is significant, which supports the information asymmetry hypothesis. Additionally we can find bond yield spread is decided by negative credit grade rather than positive credit grade under split rating condition.

Next, we examines the relationship between the CRA’s reputation and the bond yield spread in case of split rating. Here, samples were divided into full samples and split rating samples. Summarizing the result, both samples are suggest similar result, the bond yield spread is changed depending on the specific CRA’s grading which having conservative rating tendency.

Thus, This result suggest information asymmetry caused by split rating and CRA’s reputation measured by CRA’s rating tendency affect bond yield spread in Korea
An Estimation of Options Spreads Using the Order Flow Information of the Futures Market
Authors: Ryu Doojin , Yang Jin-Young
Published: September 2020

This study examines the bid/ask spread and its components in the KOSPI200 options market under the framework of the cross-market model, which utilizes the order flow information of both KOSPI200 futures and options markets. We also compare the results by the single-market model (MRR model; Madhavan et al., 1997) and by the cross-market model (Ryu (2011)’s extension). This comparison suggests that the cross-market approach can mitigate the underestimation of the permanent spread component of OTM options and the overestimation of the component of ITM options, which are often detected when we directly apply the single market model into the KOSPI200 options market where the ITM options are relatively illiquid while the OTM options are extremely liquid. We also find that the effect of the order flow information of the futures market on the option spread and its permanent spread component will vary depending on the option moneyness and the intraday time period. This implies that the order flow of the futures market has more significant effects if the degree of informed trading is relatively high.
Long Term Volatility of Interest Rate Swap and Macroeconomic Risk in Korean Market
Authors: Yoon Byung-Jo , Chang Kook-Hyun , 민구 홍
Published: September 2020

This paper tries to empirically investigate whether macroeconomic risk may be statistically useful in explaining long-term volatility of interest rate swap (IRS) in korean market. This paper uses the component-jump model to estimate long-term volatility of IRS from 1/2/2003 to 1/31/2013.

By using the component-jump model, the IRS volatility is decomposed into a long-term and a short-term component. According to this study, slope of yield curve and foreign exchange volatility as a proxy of macroeconomic risk have been significant in explaining long-term volatility of IRS.
Ad Hoc Black and Scholes Procedures with the Time-to-Maturity
Authors: Kim Sol
Published: September 2020

There are two ad hoc approaches to Black and Scholes model. The “relative smile” approach treats the implied volatility skew as a fixed function of moneyness, whereas the “absolute smile” approach treats it as a function of the strike price. Previous studies reveal that the “absolute smile” approach is superior to the “relative smile” approach as well as to other sophisticated models for pricing options. We find that the time to maturity factors improve the pricing performance of the ad hoc procedures and the superiority of the “absolute smile” approach still holds even after the time to maturity is considered.
The Determinants of Corporate CDS Spreads: Do Equity Liquidity and Jump Matter?
Authors: Park Yuen Jung , Kim Jungmu
Published: September 2020

This paper investigates whether equity liquidity and stock return jump are important determinants for the Korean corporate CDS spreads. The previous studies mainly have examined the determinants of CDS spread time series levels, whereas this study focuses on the determinants of changes or differences of CDS spread time series as well as the effecting factors of cross-sectional variations. Using monthly averaged CDS quotes for 29 firms from Jan. 2005 to Nov. 2012, we first demonstrate that the explanatory power for CDS spread changes is improved to about 39% by adding both credit risk-related market variables and firm-level jump variables, contrary to the low explanatory power (approximately 21%) reported by the previous study. However, since the principle component analysis for residuals from the regression shows that a common risk factor exists, it is possible that additional important factor remains. In addition, we demonstrate that stock return volatility is a robust variable to explain the cross-sectional differences in CDS spreads. We also find that the equity liquidity is a robust and significant factor for the cross-sectional differences in CDS spreads after the global financial crisis period. The result implies that, after the recent crisis, investors more actively considered equity illiquidity costs when they hedged their CDS exposures by stocks.
The Effects of Increasing Option Multiplier on the Arbitrage Efficiency in KOSPI 200 Futures and Options Markets
Authors: Choi Byungwook
Published: September 2020

This study examines put-call-futures parity in KOSPI 200 index futures and options markets for the sampling period between January of 2011 and December of 2013 in order to investigate whether option multiplier increasing affects on the arbitragee efficiency of an index option market and permanent relationship between futures and options markets by analyzing minute by minute historical index option and future intraday trading data.

What we find is that the arbitrage opportunities associated with put-call-futures parity increase to 5.16% from 1.75% after increasing option multiplier. Although there is no significant change of discrepancies in ATM options, a slight decrease of mispricing is found in the moneyness where call option is OTM. It turns out, however, that the arbitrage opportunities increase by 3.4 times in the moneyness below 0.97 or above 1.03, after increasing multiplier. Also ex-ante analysis shows that most of arbitrage opportunities disappear within one minute, but the speed of dissipation becomes to decrease in the moneyness where the liquidity of ITM options declines to be a very low level. Overall our results suggest that the arbitrage efficiency in the KOSPI 200 index option markets might be deteriorated after an increasing of option multiplier.
An Empirical Study on the Hedging Effects of Index ELS
Authors: Ji Young Geun , Rhee Joon H.
Published: September 2020

ELS (Equity Linked Security) is the structured product which is one of the fast grown and the most successful in Korean financial markets. In particular, ELS with the index of stocks as underlying asset (‘index ELS') has shown a remarkable growth since 2010. This paper has analyzed the hedging effects of index ELS to the KOSPI200 index and futures market. It verifies that the hedging of index ELS has not shown any significant effect to the return of KOSPI200 index and futures, but it seems that it effects on the volatility. In other words, as ELS issue amount increases, VKOSPI tends to decrease because ELS issuer which has long vega position is trying to hedge it.
Bootstrapping and Inflation Hedging Performance of Korean Equity Funds
Authors: Hong Min-Goo , Kim Jeehye , Chang Kook-Hyun
Published: September 2020

This paper examines the inflation hedging performance separated into expected and unexpected inflation in Korean equity funds. In particular, using the bootstrap approach, we identify whether the inflation hedging performance is based on skill or luck. We use the equity funds of the average net asset value (NAV) over 5 billion Korean won and over the 80% stock position. The sample data cover the period from January 2002 to March 2015. The main findings are as follows. First, most equity funds demonstrate a hedging performance against the unexpected inflation shock and this hedging performance seems to come from the fund manager’s skill. Second, our findings are robust across the sieve bootstrap results for the serial dependence and heteroscedasticity. Third, the equity funds have slightly different inflation hedging performances depending on their investment style. Among the investment styles, small-cap, growth, or small and growth style funds demonstrate more hedging performance against unexpected inflation shock. This hedging performance seems to come from the fund manager’s skill. Finally, in the case of the funds separated by winner and loser, the winner funds have more hedging performance for unexpected inflation shock than the loser funds.
Cross Section of KOSPI Returns Based on Cash Flow Risk Factors
Authors: Moon Sungjeh , Song Joonhyuk
Published: September 2020

This paper introduces two risk factors which are the covariance between long-run consumption growth and cash flows and the duration of cash flow, and investigates how these factors serve to explain the KOSPI return risk premiums. Based on our empirical results comparing the proposed two-factor cash flow model with the standard benchmark models such as CAPM and Fama-French 3-factor model (FF-3F), using KOSPI equity including de-listed stocks, the cash flow model explains 74.7% of the cross-section of equity risk premium while CAPM and FF-3F model explains 41.9% and 64.1% to the maximum, respectively, showing that the cash-flow model is superior in explaining the risk premium factor structure compared with the benchmark models. Also, the pricing error is only 4% in the two-factor cash flow model, while CAPM and FF-3F are 7.7% and 4.7%, respectively, indicating the cash flow model outperforms the standard benchmark models in pricing error as well. These results can be interpreted that the cross section of the equity risk premium is related to a firm’s cash flow and long-run consumption, and therefore the growth rate of consumption in the long run rather than contemporaneous consumption growth rate has a greater influence on the determination of the risk premium.
Cross-Section of Expected Returns Based on Equity Duration
Authors: Moon Sungjeh , Song Joonhyuk
Published: September 2020

We analyze the cross-sectional expected return of KOSPI stocks using equity duration. From 1991 to 2018, we calculate equity durations for the KOSPI listed stocks (including de-listed stocks) and find that the shorter the equity duration, the higher the risk premium. Using the 4-factor model with equity duration added to the benchmark 3-factor model, the explanatory power of the 4-factor model is superior to that of the existing benchmark model in accounting for risk premiums. This is an unusual finding that is not readily explainable by the traditional CAPM or the Fama-French 3-factor model. This can be interpreted that the equity duration is a separate and significant risk factor dissociated from the HML of the 3-factor model.
Contingent-claim Valuation of a Closed-end Fund: Models and Implications
Authors: Won Chaehwan , Yi Sangho
Published: September 2020

In this paper, we develop various valuation models for closed-end mutual funds under different sets of stochastic processes for the underlying assets. Since we used different stochastic processes from previous literature, it was possible to derive more interesting implications regarding investment strategies, discount puzzles of the funds, and valuation models. In particular, by utilizing Brownian motions and optimal stopping time framework, we succeeded in developing more realistic valuation model, which indicates that we can understand more easily about decision makings regarding optimal timing of reorganization from the closed-end funds to open-ended funds, optimal timing of trading of closed-end funds to realize maximum profits, and optimal design of closed-end fund structure.
Tax Effects on the Basis of KOSPI200 Index Futures
Authors: Oh Jong-Moon , Kim Wan-Hee
Published: September 2020

This paper conducts an empirical analysis to examine the tax effect on the basis (the difference between the futures price and the cash price) of KOSPI200 stock-index futures.

The standard cost-of-carry model relies on a simple non-arbitrage argument in which a trader replicates a “synthetic bond” with short in the futures and long in the underlying basket of cash stocks. While the synthetic bond provides the same or similar economic profiles as a normal interest-bearing instrument, the tax treatment for each is different under Korean tax code. The implicit taxes are expected to lower the before-tax rate of return on the synthetic bond, and thus to shrink the size of the basis.

The analysis indicates that implicit taxes are reflected and thus priced in the basis of KOSPI200 stock-index futures.
The Impact of Investor Sentiment on Risk Neutral Skewness: Around Financial Crisis
Authors: Kim Byungchan , Kim Sol
Published: September 2020

We examine the relation between investor sentiment proxies and the risk neutral skewness of S&P 500 index option. The risk neutral skewness is estimated by the method of Bakshi, Kapadia and Madan (2003), which is non-parametric method, and the interpolation-extrapolation method and trapezoidal rule is used. We use four sentiment proxies: Michigan Consumer Sentiment Index, non-commercial trader's net position of S&P 500 futures market, Baker and Wurgler (2006)'s sentiment index, and bull-bear survey of American Association of Individual Investors. We firstly conduct the regression to find the general relations of two variables, and then examine the lead-lag relation between investor sentiment proxies and risk neutral skewness through VAR analysis. Contrary to the previous studies, we observe that sentiment proxies show different signs by the economic conditions. Overall, the sentiment proxies explain the three-dimension moment better in the crisis in U.S, and especially non-commercial trader's net position of S&P 500 futures market explains bet among the proxies.
The NYSE Korea ETF Market
Authors: Yeom Myeong-Hoon , Baek Jae-Seung
Published: September 2020

This study focused on the Korea ETF which is listed and traded in NYSE (New York stock exchange) and analyzed empirically the price discovery effect of NYSE Korea ETF on the Korean stock market. There was almost no related research even though the Korea ETF listed in NYSE did not only show high correlation with the Korean stock market but also was often used as a predictive tool of the Korean stock market by investors.

The significance of this study is in conducting a price discovery analysis on the Korea ETF traded in NYSE by using sample data of ‘iShares MSCI South Korea Capped (symbol: EWY)' of the most abundant liquidity among Korea ETF traded in NYSE. Also, the Korea ETF traded at in Korean nighttime is the spot trading, but since the KOSPI200 nighttime futures are the derivatives trading, there is an implication that the price discovery effect between spot market and derivatives market can be compared by comparing each price discovery effect.
An Empirical Study on Price and Return of Commodity ETFs in Korea
Authors: Choi Dong Hyun , Yi Junesuh
Published: September 2020

This study analyses empirically the Granger causality between commodity ETFs listed in KRX (Korea Stock Exchange) and the price determinants of the underlying commodities as well as the KOSPI200 index and the underlying indices, and compares the performance of four commodity ETFs : gold futures, oil futures, soybean futures and the copper price. The main findings are as follows : First, the commodity ETFs tracking gold futures, oil futures and soybean futures prices in the sample from the inception to June 2015 were not directly related to the price determinants of the underlying commodities except for the copper ETF which was affected by the oil price as one of the price determinants of copper. In addition, all four ETFs were not related to the KOSPI200 index while they were affected by the underlying indices. Second, the soybean futures ETF outperformed the KOSPI200 index in terms of the cumulative returns and the oil futures ETF recorded the worst performance in terms of the cumulative returns and IR (information ratio). Third, the average tracking error of each ETF except for the oil futures ETF showed a positive value and the price of each ETF except for the soybean futures ETF has been undervalued compared to its net asset value. From the above findings, we can infer that investors in the copper ETF should closely watch the movement of the oil price to enhance the return and investors in the commodity ETFs should first consider agriculture-related ETFs rather than oil-related ETFs considering the price volatility. In addition, the inverse ETFs for copper and agriculture-related products should be introduced following the oil and gold futures inverse ETFs to protect against negative returns in a declining period of commodity prices.
The Cash-Flow Permanence and the Choice between Dividends and Stock Repurchases
Authors: Kim Sungmin , Jang Yongwon
Published: September 2020

Firms can use dividends and/or share repurchases to distribute cash to shareholders. Jagannathan, Stephens, and Weisbach (2000) argue that managers tend to use dividends to pay out permanent cash flows and repurchases to pay out temporary cash flows. This paper examines Korean firms’ decisions on their choices between paying out cash flows in the form of dividends or share repurchases. We focus on the permanence of cash flows. To complete this analysis, we decompose cash flows into a transitory component and a permanent one of each firm, employing the approach of Beveridge and Nelson (1981). We find that higher permanent cash flows increase the probability of a dividend increase, while higher temporary cash flows increase the probability of repurchases. And Korean firms tend to choose both dividend change and repurchases when temporary cash flows increase, rather than to choose only repurchases without dividend change. These empirical results show that Korean firms take into consideration of permanence of cash flows in the choice of their payout methods.
Option Demands and Investment Horizon Effects
Authors: Kang Byung Jin
Published: September 2020

This paper investigates the effect of investment horizon on the optimal portfolio choice of investors, who can access to index options market. This is to reconcile the empirical anomaly of Driessen and Maenhout (2007), which suggested that it is always optimal to short OTM puts and ATM straddles, regardless of investors’ preferences. Using the intraday data on KOSPI200 index options, one of the most actively traded options in the world, we analyze the differences in optimal choice between ‘position traders (i.e., long-term investors)’ and ‘day traders (i.e., short-term investor)’. Our main empirical findings are summarized as follows. First, short horizon investors who do not want to hold overnight option positions tend to optimally take a long position in options, whereas long horizon investors tend to hold short option positions. Second, these differences in optimal choice between short- and long-horizon investors are clearly evident in OTM puts rather than ATM straddles. Finally, our empirical findings are still valid even after considering alternative preferences structures of investors, transaction costs, different data filtering rules, and the effect of the Global financial crisis.
The Impact of the Foreign Financial Accounts Reporting Acts on the Capital Flows from Tax Havens
Authors: Yang Cheol-Won , Cho Hong-Jong
Published: September 2020

The Foreign Financial Accounts Reporting was introduced for the purpose of preventing tax evasion and illegal acts through foreign financial accounts of Koreans. On December 27, 2010, it was newly established in “The Law for the Coordination of International Tax Affairs” and received its first report in June 2011, the following year. The system was further strengthened after three revisions. The first amendment was enforced from January 2012 after it took place on December 31, 2011. Thereafter, revisions and enforcement proceeded simultaneously in January 2013 and January 2014. This paper evaluates the performance of the system for four years from 2011 to 2014. In addition, we examined the effect of institutional implementation and changes on tax haven investors through empirical analysis using Korean stock market data. Assuming that Koreans disguised as foreigners participate in Korean stock trading through an anonymity of tax haven, this system will work to shrink the flow of capital from tax haven investors to other countries. Panel regression analysis using capital flows by country found that the transaction activity of tax havens decreased as compared to other countries after introducing and strengthening the acts.
Digital transformation of traditional marketing business model in new industry era
Authors: Caliskan Aylin , Özkan Özen Yeşim Deniz , Ozturkoglu Yucel
Published: September 2020

Purpose

Impact of the digitalization on the production and service sector is a highly popular topic in these days and especially, new business models receive increasingly more attention. Under the light of digitalization, the Fourth Industrial Revolution, so-called Industry 4.0, and its impacts on all kinds of process is a promising topic in the academia and also beneficial for the practitioners. Since there are arguments from scholars that Industry 4.0 has an important and shaping effect on marketing, the concept of 7P's in marketing should be incorporated in Industry 4.0 elements. From this point of view, this study focuses on developing the understanding of 7P's based on contemporary perspectives of Industry 4.0.

Design/methodology/approach

In order to do that, different criteria related to integration of Industry 4.0 and marketing practices under each marketing-mix element are presented and one of the multi-criteria decision-making (MCDM) methods, the best–worst method (BWM) is used to prioritize the criteria for future implications.

Findings

Results indicated that product, process and physical evidence are the most affected marketing-mix factors by considering Industry 4.0. managerial implications which were also presented based on the numerical results.

Originality/value

An in-depth analysis of literature review related to Industry 4.0 revealed that changing and developing technologies are examined in detail mostly around a production perspective. In order to fulfill the gap in the knowledge, this study focuses on the examination of impacts of Industry 4.0 on the marketing-mix strategy. To the best of the authors’ knowledge, this is the first study which merges Industry 4.0 with the marketing mix.
Establishing SME–university collaboration through innovation support programmes
Authors: Kurdve Martin , Bird Anna , Laage-Hellman Jens
Published: September 2020

Purpose

The research purpose is to analyse when and how innovation support programmes (ISPs) can affect collaboration between universities and established small and medium sized enterprises (SMEs). The paper specifically considers SME’s absorptive capacity.

Design/methodology/approach

A Swedish research centre is studied in the context of innovation support and two of its SME-ISPs are examined with regards to industry–university collaboration and impact on firm innovation capabilities. Data collection and analysis are performed, using interviews, survey answers, document search and reflectional analysis to evaluate processes and effects of the centre and the programmes.

Findings

A developed research centre, integrated into both academia and industry, can support translational collaboration and promote SME innovation absorptive capacity. The action learning elements and the organisational development approaches used when coaching in the ISPs contribute to the SMEs internal absorption capacity and collaborational skills. Organising collaboration into ISPs can provide a relational path to future collaboration with universities, which, for example start with student projects.

Research limitations/implications

The study, though limited to one Swedish region, adds to empirical innovation research as it connects industry–university collaboration and absorptive capacity to organisational learning.

Practical implications

The empirical results indicate possible long-term gains for industry and universities in building collaborative innovation into SME-ISPs.

Originality/value

The contribution of this study pertains to the practice of innovation support for established SMEs with the inclusion of absorption capacity and collaborative innovation development.
Google Popular Times: towards a better understanding of tourist customer patronage behavior
Authors: Möhring Michael , Keller Barbara , Schmidt Rainer , Dacko Scott
Published: September 2020

Purpose

This paper aims to investigate actual tourist customer visiting behavior with behavioral data from Google Popular Times to evaluate the extent that such an online source is useful to better understand, analyze and predict tourist consumer behaviors.

Design/methodology/approach

Following six hypotheses on tourist behavior, a purpose-built software tool was developed, pre-tested, and then used to obtain a large-scale data sample of 20,000 time periods for 198 restaurants. Both bi-variate linear regression and correlation analyzes were used for hypothesis testing.

Findings

Support was established for the hypotheses, through an analysis of customer reviews, timing effects, the number of pictures uploaded and price segment information provided by tourists to a given restaurant. Also, a relationship to average duration time was found to be positive. The findings demonstrate that data provided through Google Popular Times matches theoretical and logical assumptions to a high degree. Thus, the data source is potentially powerful for providing valuable information to stakeholders (e.g. researchers, managers and tourists).

Originality/value

This paper is the first to both conceptually and empirically demonstrate the practicality and value of Google Popular Times to better understand, analyze and predict tourist consumer behaviors. Value is thereby provided by the potential for this approach to offer insights based behavioral data. Importantly, until now such an approach to gathering and analyzing this volume of actual customer data was previously considered far less practical in terms of time and expense.
New Approach to Financial and Economic Stability in the United States from a Banking Perspective
Authors: Fernández Fernández José Alejandro , Bejarano Vázquez Virginia , Vicente Virseda Juan Antonio
Published: September 2020

This work analyses the relationships between the banking sector and the economy as a whole in the United States between 1990 and 2016. The data are obtained from the Federal Reserve System (FED) and the Federal Deposit Insurance Corporation (FDIC). The methodology applied is canonical analysis, and this analysis will allow us to obtain composite indicators on the real and financial state of the economy, among other composite indicators. This study’s main contribution and originality is centred on this new way of addressing financial and economic stability. Its contributions to macroprudential policy, as well as the financial and economic stability measures it creates, are valuable.