Browse

How do Investors in the Korean Stock Market React to Nuclear Threats from North Korea?

Cited 0 time in Web of Science Cited 0 time in Scopus
Authors
CHOI, JE-JOON; PARK, HYOUNG-JIN
Issue Date
2010-12
Publisher
College of Business Administration (경영대학)
Citation
Seoul Journal of Business, Vol.16 No.2, pp. 39-66
Keywords
North Koreanuclear testmarket destabilizationpositive feedback tradingherding behavior
Abstract
This article examines how investors react to nuclear threats from North

Korea on the South Korean stock market. To investigate the differences in

investor groups responses, we divide investors into three groups: domestic

individual, domestic institution and foreign investors. In addition, we

classify the nuclear threats into the one actual threat and the seven verbal

threats and compare trading activities of investors against those in the

peaceful period of 2004. The net-buying and LSV(1992) herding measures

are applied to examine investors trading behavior. Our results show that it

was only for the case of the actual threat that investors trades significantly

differed with the peaceful period. In addition, our results show that the

three investor groups reacted to the actual nuclear threat differently.

When the actual nuclear threat occurred, individuals sold, institutes and

foreigners bought stocks. Like in the peaceful period, institutes showed a

positive slope for lagged returns whereas individuals displayed a negative

slope. Foreigners, however, bought regardless of previous returns. Moreover,

LSV herding measure increased in all investor groups.
ISSN
1226-9816
Language
English
URI
https://hdl.handle.net/10371/75577
Files in This Item:
Appears in Collections:
College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of BusinessSeoul Journal of Business Volume 16, Number 1/2 (2010)
  • mendeley

Items in S-Space are protected by copyright, with all rights reserved, unless otherwise indicated.

Browse