Contents

Transmission of Stock Returns and Volatility: the Case of Korea

Hahm, Sang Moon

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Abstract

The extent of international financial integration among the developed economies has been well documented in the literature.
This paper examines whether there are lagged spillovers in return and volatility between the U.S. and Korea, an emerging economy, for a
sample period including the financial crisis of 1997. Using open-toclose KOSPI and S&P 500 returns, this paper finds statistically
significant lagged volatility spillovers from Korea to the U.S. but not from the U.S. to Korea. This paper also finds that statistically
significant lagged return spillovers do not exist in neither the Korean nor the U.S. stock markets. Thus, that domestic market efficiently
adjusts to foreign information holds even for an emerging market. Finally, this paper finds that when KOSPI returns measured in U.S.
dollars are used, statistically significant lagged return spillovers exist from the U.S. to Korea but not from Korea to the U.S. This paper
concludes that the lagged return spillovers with returns measured in U.S. dollars may result from the way the Korean government has
intervened in the KRW/USD foreign exchange market.

Issue Date
2004
Publisher
한국경제연구학회
Keywords
spillover; stock returns; volatility; GARCH
Citation
KOREA AND THE WORLD ECONOMY, v.5, no.1, pp.17 - 46, 2004
URL
http://www.akes.or.kr/eng/kweconomy/previous-issues/
Journal Title
KOREA AND THE WORLD ECONOMY
Start Page
17
End Page
46
ISSN
1598-2750
Language
English
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