Asian Review of Financial Research Vol.24 No.2 pp.525-620
Market Microstructure in the Korean Financial Markets : A Survey
Key Words : Market Microstructure,Market Macrostructure,Expansion to Investments and Corporate Finance,Korean Stock Markets
We provide the first comprehensive review of the market microstructure literature on the Korean financial markets, published in the five leading Korean journals from 1990 to mid-2010. We also offer some perspective on the literature for investors, exchange officials, policy makers, and regulators and provide a roadmap for future research endeavors. This paper includes the following five main categories: (1) micro aspects of the microstructure world: orders and trades, basic market quality, price discovery, and trading mechanisms; (2) trading protocols: rules and regulations related to trading; (3) market transparency; (4) market macrostructure; (5) expansion of market microstructure to the fields of investments and corporate finance. We find that the current status of the Korean market microstructure research is as follows. The research in the Korean market microstructure has been disproportionately concentrated into the two categories of micro aspects and trading protocol. However, most of them were conducted during the 1990s, which has limited the perspectives on the academic and policy implications by periods, subjects, and trading protocols. The research on the categories of transparency and market macrostructure is very limited, even though these areas contain features of Korean markets that are unique among world markets. The research of market microstructure combined with investments has been fairly active, whereas that combined with corporate finance is at its inception.