MARKET IMPACT AND ORDER BOOK CHARACTERISTICS IN THE KOREAN FUTURES MARKET

Junghoon Lee, Janghyuk Youn and Woojin Chang ()
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Junghoon Lee: Technology Management Economics and Policy Program, Seoul National University, Seoul 151-742, Korea
Janghyuk Youn: Technology Management Economics and Policy Program, Seoul National University, Seoul 151-742, Korea
Woojin Chang: Department of Industrial Engineering, Seoul National University, Seoul 151-742, Korea

International Journal of Modern Physics C (IJMPC), 2011, vol. 22, issue 11, 1269-1279

Abstract: We have examined the order book characteristics and market impact on the Korean stock index futures market (KOSPI 200 index futures). The distribution of order volumes generally follows power-law distribution. The estimated exponents are 1.9 for market order, 2.5 for limit order, and 2.1 for cancel order. This result is different from the case of stocks where the exponent of market order is larger than that of limit order. The order likelihood is distinctively high in every 50's of order volume, which implies the behavioral characteristics of human preference on round-up numbers. The distributions of bid–ask spread and the best quotes volume provide the evidence of the liquidity of KOSPI 200 index futures market. We have obtained the concave relationship between market impact and transaction volume as well. Finally, the market response behavior is observed regarding various transaction sizes. The size of market response is estimated to be proportional to the size of transaction. Also, the larger the transaction size is, the longer it takes to recover the stability from the impact triggered by transaction.

Keywords: Market impact; order book; futures; 89.65.Gh; 89.75.Da (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1142/S0129183111016889

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