The Performance of After-hours Trading Strategies Using the Effect of Price Discovery in the KOSPI200 Nighttime Futures
Woo-baik, Lee
This paper investigates the performance of after-hours trading strategy using the price discovery of the KOSPI200 nighttime futures. As the information on trade of nighttime futures is fully reflected in the opening price of individual stocks listed on KRX, the nighttime futures has the significant predictive power of price movement on next trading day. Based on this price discovery in nighttime futures, the strategy of which traders buys the stocks at the previous closing price in after-hour market and sells at opening price on the upmarket of nighttime futures yields the significant profit. Meanwhile the strategy of selling the stocks at closing session is under-performed due to the price revision after opening irregardless of the previous movement of nighttime futures. This under-performance of strategy on buy at opening price and sell at closing price is consistence with the efficient incorporation of nighttime futures information into opening price. Moreover, the strategy on short-sale of the stocks at the previous closing price in after-hour market and buying at opening price based on the negative information of nighttime futures also yields the significant profit. These investment strategies using the nighttime futures and after-hours market are more effective on the stocks of high beta.