The purpose of this study is to analyze the effect of multiplier change on trading volume and investors’ weight of KOSPI200 stock index options and futures using intervention model. For this study, total sample period including the period in which two types of trading multipliers were applied was selected as 1,685 trading days from June 1, 2011 to March 30, 2018. Hence, the analysis was performed by divided total period into three sections before the trading multiplier change(259 trading days), after the trade multiplier increase(1,179 trading days), and after the trading multiplier reduction(247 trading days).
On the one hand, the results of the empirical analysis for KOSPI200 stock index options are as follows. First, the difference analysis is performed with the trading volume and the investors’ weight before and after the change of multiplier. In the case of trading volume, foreigners, individuals, and institutions in order significantly decreased(increased) when the option multiplier was increased(decreased). In the case of investors’ weight, as the option multiplier changed, weight of foreigners was increased while that of institutions was decreased. The weight of individual was increased since the option multiplier was increased, and it decreased as the option multiplier was reduced.
Second, the unit root test is performed using the ADF test in order to check the stationary of the time series data for total period. There is no unit root in the time series data excluding institutional investors. Also, it is confirmed that both the trading volume and the individual and foreign investors’ weight follow the AR(1) process by checking the ACF and PACF using the time series data before the intervention.
Third, the main analysis is performed through the intervention model. Total trading volume was significantly decreased due to the trading multiplier increase on June 15, 2012. It seems to be an abrupt and permanent form as a step function, especially in the form of decrease. Moreover, the weight of the foreign investors significantly increased at the same time. Namely, the increase in the trading multiplier is a policy introduced to limit the entry of indiscreet individual investors into the market, so it seems to have achieved the goal of the policy authority owing to the reduce effect of liquidity.
While the trading multiplier cut implemented on March 27, 2017 was found to have an intervention effect only on the weight of foreign investors. There were no significant intervention effect in the trading volume and individual investor weight. This result can be interpreted as contrary to the expectation that investors'' entry will be easier than before if the transaction amount per contract is lowered due to the cut in the trading multiplier. In other words, the trading multiplier cut policy has a relatively smaller effect on the market than the trading multiplier increase policy because it is still relatively higher than the initial trading multiplier of 100,000 won. It is necessary for activating the market to lower multiplier to 100,000 won, which is the original trading multiplier.
On the other hand, the results of the empirical analysis for KOSPI200 stock index futures are as follows. First, the difference analysis is performed with the trading volume and the investors’ weight before and after the change of multiplier like KOSPI200 options. In case of total trading volume, it was decreased when the option multiplier was increased from 100,000 won to 500,000 won. it was increased since futures multiplier was decreased from 500,000 won to 250,000 won. In the case of investors’ weight, after the multiplier was changed, weight of foreigners was increased while that of individual and institution investors were decreased.
Second, the unit root test is performed using the ADF test so as to check the stationary of the time series data for total period. There is no unit root in the time series data of trading volume, individual and institution investors weight. Also, it is confirmed that trading volume and investors’ weight follow the ARMA(1,1) process by checking the ACF and PACF using the time series data before the intervention,
Third, the result of the analysis using the intervention model is that trading volume was not significantly increased by the decrease of futures multiplier, on March 27, 2017. However, the volume of foreign investors was significantly increased since that. It seems to be an abrupt and permanent pattern as a step function, especially in the form of increase. Moreover, the weight of the individual and institution investors significantly increased at the same time. Namely, the multiplier cut policy in the KOSPI200 futures seems to have achieved the goal of the policy authority, which is to lower the market entry regulations for investors since March 27, 2017.