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What Drives the Stock Market Comovements between Korea and China, Japan and the U.S.?

Jinsoo Lee and Bok-Keun Yu

KDI Journal of Economic Policy, 2018, vol. 40, issue 1, 45-66

Abstract: This paper measures the extent of comovements in stock returns between Korea and three major countries (China, Japan and the U.S.) using industry-level data for Korea from 2003 to 2016 in the spirit of the international capital asset pricing model. It also examines what drives the comovements between Korea and the three countries. We find that the comovements of Korean stock returns with those of the U.S. and Japan became smaller after the global financial crisis. In contrast, the comovement in stock returns between Korea and China became larger after the crisis. After an additional analysis, we conclude that trade linkage is the main driver of the comovements between Korea and the three countries.

Keywords: Stock Market Comovement; Trade Linkage; Financial Linkage (search for similar items in EconPapers)
JEL-codes: F15 F21 G15 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kdijep:200819

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