نوسانات بازار سهام کره در طول بحران ارز و بحران وام و اعتبار

This paper studies the volatility of the Korean stock market during the Asian currency crisis of 1997–1998 and the global credit crisis of 2008–2009. We use a fad model with Markov switching heteroskedasticity, which was first proposed by Kim and Kim (1996). Using the monthly data from January 1980 to October 2009, we find that the volatility of the transitory component of the stock return, or fads, increased during the currency crisis, but did not rise much during the credit crisis. It implies that the stock price fluctuations were not driven by irrational sentiments during the recent global crisis as much as during the former crisis. However, when we consider the dollar value of the Korean stock index in order to estimate the volatility that foreign investors confront, we find that the volatility of the transitory component was raised during the credit crisis as well as during the currency crisis. That is, foreign investors experienced greater volatility than domestic investors in the recent financial market turmoil. This asymmetric volatility that domestic and foreign investors face is one of the characteristics of the credit crisis. For more detailed analysis, the same model was applied to the weekly data from January 2005 to October 2009 and provided the result that the data measured by won–dollar exchange rates were more increased than the raw data. It holds that foreign investors confronted much greater volatility than domestic investors while the stock volatility was relatively lower in the credit crisis state than in the currency crisis state.

The sub-prime mortgage crisis started in the USA in March 2007 and the failure of Lehman brothers in September 2008 caused economic panic on the world economy. The Korean economy was also affected by the global credit crisis. As foreign capital exited from the Korean stock market, stock prices plummeted and the won–dollar exchange rate soared. All this reminded investors and policymakers of the Asian currency crisis of 1997. Fortunately, the stock market seemed to recover from the panic by early 2009. As Fig. 1 shows, the drop of the Korea composite stock price index, or KOSPI, during the credit crisis in 2008–2009 was smaller than that during the currency crisis in 1997–1998. This observation might be related with the fact that the currency crisis was caused by an inner problem of the Korean economy, but the credit crisis started from the outside. However, foreign investors seemed to confront no less shock during the recent crisis than during the 10-year-old crisis. In Fig. 1 again, the dollar value of the Korean stock index dropped during the credit crisis almost as much as during the currency crisis. It implies that the exchange rate played a great role in the global credit crisis. The purpose of this study is to analyze the differences between two crises of the Korean economy in terms of stock market volatility. Full-size image (32 K) Fig. 1. Korean stock index. Figure options Stock prices are known to have irrational movements, which are called fads, especially in an economic crisis state. In addition, it is observed that the volatility of the stock return is time-varying. Considering these facts, this study uses the UC–MS model, which was first proposed by Kim and Kim (1996), where the fad is the unobservable component (UC) and the volatility is Markov switching (MS). We analyze the estimated result on the stock return volatility especially focusing on the comparison between the two crises. The main results of this paper are as follows. Using the monthly data from January 1980 to October 2009, we find that the volatility of the transitory component of the stock return, or fads, increased during the currency crisis, but did not rise much during the credit crisis. It implies that the stock price fluctuations were not driven by irrational sentiments during the recent global crisis as much as during the former crisis. However, when we consider the dollar value of the Korean stock index in order to estimate the volatility that foreign investors confront, we find that the volatility of the transitory component was raised during the credit crisis as well as during the currency crisis. That is, foreign investors experienced greater volatility than domestic investors in the recent financial market turmoil. This asymmetric volatility that domestic and foreign investors face is one of the characteristics of the credit crisis. For a more detailed analysis on the credit crisis, we use the weekly won-valued and dollar-valued stock index from January 2005 to October 2009 to estimate the same model. The results show that the volatility of the dollar value of the Korean stock index was greater than that of the index in local currency. It confirms the fact that foreign investors confronted much greater volatility than domestic investors during the credit crisis. The rest of this paper is organized as follows. Section 2 surveys the previous studies. Section 3 introduces the model for the stock market volatility. Section 4 discusses the empirical results. Section 5 concludes the paper.

Even though the global credit crisis of 2008–2009 occurred in advanced economies, it had a serious negative effect on the Korean economy, too. Foreign capital flight and the sharp depreciation of the won reminded investors and policymakers of the Asian currency crisis of 1997–1998. However, it turns out that the Korean stock market suffered less during the credit crisis than the currency crisis. To compare the two crises with respect to the stock volatiltiy, we estimate a fad model with Markov switching heteroskedasticity using the monthly Korean stock index data from January 1980 to October 2009. We find that the volatility of the transitory component of the stock return, or fads, increased during the currency crisis, but did not rise much during the credit crisis. It implies that the stock price fluctuations were not driven by irrational sentiments during the recent global crisis as much as during the former crisis. However, when we consider the dollar value of the Korean stock index in order to estimate the volatility that foreign investors confront, we find that the volatility of the transitory component was raised during the credit crisis as well as during the currency crisis. That is, foreign investors experienced greater volatility than domestic investors in the recent financial market turmoil. We argue that this asymmetric volatility that domestic and foreign investors face is one of the characteristics of the credit crisis.