Crisis Index Prediction Based on Momentum Theory and Earnings Downside Risk Theory: Focusing on South Korea’s Energy Industry

Jeonghwa Cha, Kyungbo Park, Hangook Kim and Jongyi Hong ()
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Jeonghwa Cha: Department of Business Administration, Pusan National University, Busan 46241, Republic of Korea
Kyungbo Park: Department of Business Administration, Sungkyunkwan University, Seoul 03063, Republic of Korea
Hangook Kim: Division of Data Analysis, Korea Institute of Science and Technology Information, Seoul 02456, Republic of Korea
Jongyi Hong: Institute for Research & Industry Cooperation, Pusan National University, Busan 46241, Republic of Korea

Energies, 2023, vol. 16, issue 5, 1-20

Abstract: (1) Background: The economic impact of supply and demand in the energy industry can be seen throughout raw material production, processing and distribution. The purpose of this study is to provide academic information to prepare for crisis management through prediction using indices. (2) Method: In order to predict a crisis of the energy industry, the Crisis Index presented by the Korea Institute of Science and Technology Information was utilized instead of the economic indicators that have hitherto been widely used. Specifically, we propose a new forecasting model based on the concept of economic momentum theory used in financial research and the proper weighting of the earning downside risk theory. Then, statistical empirical analysis was performed to verify the new prediction model. (3) Results: As the result of the empirical analysis, the risk index prediction model proposed in this study showed statistically significant results in predicting the future risk index. (4) Conclusions: This study proposed a risk prediction model using an index and thereby provides an academic analysis of the predictability of numerous indicators created for various purposes and, furthermore, provides implications for predicting crises in the Korean energy industry.

Keywords: energy industry index; risk prediction; momentum; earnings downside risk (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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