Analysis of the Korean Stock Market

The following sections are included:

• Contents
• Preface
• About the Authors

The following sections are included:

• History of Korean Capital Market
• Current Status of Korean Stock Markets
• References

The efficient market hypothesis does not imply that all investors are rational decision makers. Many irrational investors participate in capital markets. However, the impact of their trading on securities prices can be negligible for two reasons. First, irrational investors may be simple noise traders whose trading is not systematic. For example, some of them may irrationally buy stocks with hopes for a bull market, while others may irrationally sell them with the expectation of a bear market. As a result, the aggregated trading of these noise traders will not strongly influence stock returns. Second, rational informed arbitrageurs play an important role in eliminating price errors caused by noise traders. Since arbitrage activities wind up with profits for the arbitrageurs and losses for irrational investors, the market power of arbitrageurs will rise, thus diminishing the power of irrational investors…

The following sections are included:

• January Effect
• January Barometer
• Weekend Effect
• Holiday Effect
• References

Asset pricing models suggest that a stock’s performance should not ultimately depend on the stock’s characteristics but on its risk. Academicians, however, have documented several anomalies related to size, book-to-market (B/M) ratio, past returns and so on which cannot be explained by asset pricing models. Several hypotheses and empirical results in the academic literature have been provided to explain the source of these anomalies. On the other hand, practitioners of the asset management industry have paid attention to these anomalies since the anomalies imply that, based on their characteristics, certain categories of stocks can consistently outperform others. According to Bernstein (1995), the investment world developed investment products to take advantage of anomalies long before the academic world agreed that anomalies even exist. However, styling investments based on size and B/M ratio began to spread rapidly within the institutional investor community during the 1980s when academic research confirmed the persistence and robustness of the anomalies…

We examine stock-price movements around the announcement of corporate events such as IPOs, SEOs, stock splits, share repurchases, and dividend payments. According to the efficient market hypothesis (EMH), stock price reacts to new information fully and instantaneously. Thus, it is difficult to earn abnormal returns using an investment strategy based on corporate events. However, many researchers claim that the markets under- or overrespond to the information from a behavioral perspective. Thus, we summarize market behavior related to the announcement of corporate events in Korea…

This chapter examines the sales revenue, profitability, valuation, and financial risk of listed companies in the Korean stock market at both the sector and industry level by using the most recent data, including data from 2015. We also analyze individual industries according to their market share, profitability, valuation (M/B ratio), and financial risk…

The following section is included:

• Index