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Financial market largely affected by bad economic news: report

All Headlines 12:08 January 09, 2019

SEOUL, Jan. 9 (Yonhap) -- The South Korean financial market is even more impacted by bad economic data than good data, a report by the central bank said Wednesday.

The report published by the Bank of Korea (BOK) measured volatility dynamics of option derivatives using intraday data on the KOSPI 200 index before and after announcements of key economic data, including the BOK's monetary decisions, gross domestic product, trade balance and industrial outputs.

"The study found that the intrinsic volatility of put options became wider than that of call options in case of fresh macroeconomic data announcements," author Lee Ju-eun from the BOK said. "This means market players are more sensitive to bad news than good news."

In the market, put and call options are regarded as fear and greed indexes, respectively. Put options allow investors to sell at an agreed price on or before a specified date, while holders of call options have the right to buy in the same way.

Also, the report noted that the central bank's rate hike decisions have a greater impact on market volatility than rate cut announcements.

"The market naturally responds to fresh economic data," the author said. "But the authorities have to watch carefully when there is excessive volatility in the market."

Financial market largely affected by bad economic news: report - 1

brk@yna.co.kr
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