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Return patterns of South Korean stocks following large price shocks

Kolaric, S. and Kiesel, F. and Schiereck, D. (2016):
Return patterns of South Korean stocks following large price shocks.
In: Applied Economics, pp. 121-132, 48, (2), ISSN 1466-4283,
[Online-Edition: http://www.tandfonline.com/doi/full/10.1080/00036846.2015.10...],
[Article]

Abstract

This study tests the market efficiency of the South Korean stock market by examining returns on stocks of the constituents of the KOSPI 50 from 2000 to 2014 following large 1-month price decreases and increases. An exponential GARCH (EGARCH) event study framework is used to analyse the stock returns. The results show that large price shocks, positive and negative, are likely to be followed by positive market returns. Moreover, the results show an increase in the beta of stocks in the years following a large price shock. The overall results therefore support the Uncertain Information Hypothesis. However, beginning in 2008, return patterns more closely reflect those hypothesised by the Efficient Market Hypothesis, possibly due to increased participation by international investors. The observed returns following large price increases and decreases can be partially explained by changes in the Korean won to US dollar exchange rate and the trading behaviour of foreign investors.

Item Type: Article
Erschienen: 2016
Creators: Kolaric, S. and Kiesel, F. and Schiereck, D.
Title: Return patterns of South Korean stocks following large price shocks
Language: English
Abstract:

This study tests the market efficiency of the South Korean stock market by examining returns on stocks of the constituents of the KOSPI 50 from 2000 to 2014 following large 1-month price decreases and increases. An exponential GARCH (EGARCH) event study framework is used to analyse the stock returns. The results show that large price shocks, positive and negative, are likely to be followed by positive market returns. Moreover, the results show an increase in the beta of stocks in the years following a large price shock. The overall results therefore support the Uncertain Information Hypothesis. However, beginning in 2008, return patterns more closely reflect those hypothesised by the Efficient Market Hypothesis, possibly due to increased participation by international investors. The observed returns following large price increases and decreases can be partially explained by changes in the Korean won to US dollar exchange rate and the trading behaviour of foreign investors.

Journal or Publication Title: Applied Economics
Volume: 48
Number: 2
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Betriebswirtschaftliche Fachgebiete
01 Department of Law and Economics > Betriebswirtschaftliche Fachgebiete > Corporate finance
Date Deposited: 27 Aug 2015 10:49
Official URL: http://www.tandfonline.com/doi/full/10.1080/00036846.2015.10...
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