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Test for Spatial Dominances in the Distribution of Stock Returns: Evidence from the Korean Stock Market Before and After the East Asian Financial Crisis

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  • Kim Chang Sik

    (Sungkyunkwan University)

Abstract

This paper examines the spatial dominance of Korean stock market returns before and after the East Asian financial crisis around 1997. The spatial analysis developed by Park (2006) gives a new tool to test the distributional dominance of one process over the other even under nonstationarity. Extending the notion of well-developed stochastic dominance to the nonstationary time series whose distributions are time-varying, the existence of spatial dominances in Korean stock market returns is investigated. We find the evidence that the cumulative return distributions of Korean stock market index before the crisis spatially dominate the distributions after the crisis in the short term investments, and the dominance gets weaker as the investment period gets longer.

Suggested Citation

  • Kim Chang Sik, 2009. "Test for Spatial Dominances in the Distribution of Stock Returns: Evidence from the Korean Stock Market Before and After the East Asian Financial Crisis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 13(4), pages 1-27, September.
    • Handle: RePEc:bpj:sndecm:v:13:y:2009:i:4:n:4
    DOI: 10.2202/1558-3708.1672
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    References listed on IDEAS

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    1. Cho, Young-Hyun & Linton, Oliver & Whang, Yoon-Jae, 2007. "Are there Monday effects in stock returns: A stochastic dominance approach," Journal of Empirical Finance, Elsevier, vol. 14(5), pages 736-755, December.
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    7. Russell Davidson & Jean-Yves Duclos, 2000. "Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality," Econometrica, Econometric Society, vol. 68(6), pages 1435-1464, November.
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    Cited by:

    1. Ibarra, Raul, 2013. "A spatial dominance approach to evaluate the performance of stocks and bonds: Does the investment horizon matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 429-439.
    2. Eunhee Lee & Chang Kim & In-Moo Kim, 2015. "Equity premium over different investment horizons," Empirical Economics, Springer, vol. 48(3), pages 1169-1187, May.
    3. Sungro Lee, Chang Sik Kim, In-Moo Kim & Chang Sik Kim & In-Moo Kim, 2012. "Testing the Monday Effect using High-frequency Intraday Returns: A Spatial Dominance Approach," Korean Economic Review, Korean Economic Association, vol. 28, pages 69-90.

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