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Korean Journal of Financial Studies 2009;38(2):177-205.
Published online June 30, 2009.
International Comparison of Forecasting Reactions of Stock Prices to Contemporaneous Global Shocks
Yun Yeong Kim
글로벌 동시 충격에 대한 주가 예측반응의 국제 비교
김윤영
Abstract
This paper discusses whether there is any difference of the stock price responses in advance to the contemporaneous global shocks between Korea and other five countries including the United States, the United Kingdom, the European Union, Japan and Hong Kong. As a global shock, we consider the changes (increase or decrease) in the federal fund rate (FFR) of the United States. In particular, we estimated the daily equation explaining the changes of stock prices in each country five days before FFR changes. The explanatory variables of theses equations used for the forecasting of FFR were integrated in an index function reflecting an expectation of stock market participants. In particular, the credit and term spreads with the lagged FFR were used for these variables in the index function. The stock price in the United States was used as a common explanatory variable for the equations of every country. The estimation is conducted after dividing the data into two regimes of ``increase`` and ``decrease`` separately. According to the estimation results, first of all, the stock prices commonly showed the asymmetry of responses in advance. In particular, the prior responses to the future ``increase`` of FFR were less sensitive than that to the future ``decrease`` of FFR. A partial cause of this asymmetry may be explained by the reflection effect in the prospective theory of Kahneman and Tversky (1979). Second, the responses of Asian countries were less observed than those of western countries like the United States and the United Kingdom. The relatively less sensitive reactions of Asian countries in advance to global shocks may be also explained by the retarded developments of financial markets comparing with the western countries.
Key Words: 국제비교,글로벌 충격,미연방기금금리,예측반응,주가변동,Federal Fund Rate,Forecasting Reaction,Global shocks,International Comparison,Stock Price Changes
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