The Expiration Day Effects of Single Stock Futures : Evidence from Korea

In this study, we analyzed whether the expiration day effect of domestic single stock futures exists. One-minute stock prices and trading volume by trader types is used. Data ranges from May 2008 to June 2016. The expiration day effects are measured by price reversal, price shock, volatility effect, and volume effect. Since the expiration day of single stock futures is on the second Thursday of each month, we analyzed whether the expiration day effects differ between expiration Thursday and non-expiration Thursday. The price reversal effect is evident in Samsung Electronics and Hyundai Steel, and the price shock effect is evident for KT and KT&G. However, price reversals and price shocks are not generally found in other stocks. On the other hand, in most stocks (16 out of 22), the volatility effect variables were statistically significantly larger on the expiration Thursday than non-expiration Thursday. The expiration day effects of single stocks are evident in the trading volume. First of all, trading volume increased significantly on expiration Thursday than non-expiration Thursday. In particular, the trading-volume shares of institutional investors and foreign investors increase and the share of individual investors is decreasing. This suggests that the increase in trading volume on expiration Thursday is mainly due to the increase in the trading-volume shares of institutional investors and foreign investors, who are supposed to be in the information superiority. In addition, we can conjecture that the larger volatility level on expiration Thursday than on non-expiration Thursday may be due to institutional investors and foreign investors rather than individual investors.