Efficiency of Price Discovery during Nighttime Trading Session : Evidence from KOSPI200 Global Futures

Trading of KOSPI 200 futures on CME Globex platform, which was launched in November 2009, starts at 18:00 and closes at 05:00 in the next morning. This paper examines how price of KOSPI200 Global futures is discovered during nighttime trading session by using tick data. The overall results of this study can be summarized as follows; First, we find that the weighted price contribution (WPC) exhibits asymmetric ‘W’-shaped curve during session. This finding is interpreted as that information is consequently transmitted from Globex and NYSE with ‘U’-shaped curve of intradaily price discovery to KOSPI 200 Global futures. Meanwhile, the weighted volume contribution (WVC) also shows ‘W’-shaped curve but weighted price contribution per volume contribution (WPCV) indicates asymmetric ‘U’-shaped curve. This finding that a trade is more (less) informative when trading intensity is higher (lower) provides evidence of partially supporting the “Event Uncertainty Hypothesis” over “Hot Potato Hypothesis”. Second, the price change of closing to opening time significantly contributes to price change during the close-to-close time span. This result explains information during regular daytime trading of KOSPI200 futures is efficiently incorporated in opening price of nighttime session. Third, nighttime traders of KOSPI200 futures recognize volatility of US stock market as more valuable information than the price of futures on CME Globex.