À繫¿¬±¸ Á¦ ±Ç È£ (2014³â 5¿ù)
Asian Review of Financial Research, Vol., No..
pp.147~193
pp.147~193
Does Buy-and-Hold Pay Off in Structured Products? An Analysis of Account-Level Transactions
Youngsoo Choi Professor of Mathematics, Hankuk University of Foreign Studies
Woojin Kim Associate Professor of Finance, Seoul National University Business School
Eunji Kwon Hankuk University of Foreign Studies
This paper documents that median holding period in structured products based on market index is less than a day from initial purchase to liquidation even for retail investors. Less than 6% of all series ever traded by retail investors are held until maturity. More importantly, buy-and-hold strategies perform worse than frequent trading. Based on a unique proprietary dataset that provides the details of all transactions - including account identifier and direction of the trade - in the Korean ELW (equity linked warrant) market between 2009 and 2011, we find that both HFT (high frequency trader) accounts and non-HFT accounts perform worse when either average holding period is long or average end-of-the-day position is large. Such failure of buy-and-hold strategy likely reflects time decaying properties, i.e. theta, of option-like products. Our findings suggest that measuring expected returns for options simply assuming that they are held until maturity may underestimate the true expected return.
Youngsoo Choi
Woojin Kim
Eunji Kwon
This paper documents that median holding period in structured products based on market index is less than a day from initial purchase to liquidation even for retail investors. Less than 6% of all series ever traded by retail investors are held until maturity. More importantly, buy-and-hold strategies perform worse than frequent trading. Based on a unique proprietary dataset that provides the details of all transactions - including account identifier and direction of the trade - in the Korean ELW (equity linked warrant) market between 2009 and 2011, we find that both HFT (high frequency trader) accounts and non-HFT accounts perform worse when either average holding period is long or average end-of-the-day position is large. Such failure of buy-and-hold strategy likely reflects time decaying properties, i.e. theta, of option-like products. Our findings suggest that measuring expected returns for options simply assuming that they are held until maturity may underestimate the true expected return.
Option,ELW (Equity Linked Warrant),HFT (High Frequency Trader),Korea
[ 07327 ] 67-8, Yeouinaru-ro, Yeongdeungpo-gu, Seoul, Korea TEL. +82-2-2003-9921 FAX. +82-2-2003-9979 E-mail. office@korfin.org COPYRIGHT(C) SINCE 1987 KOREAN FINANCE ASSOCIATION. All rights reserved.