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Understanding BOXPI — Industry portfolio perspectives

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  • Kim, Myeong Hyeon
  • Kim, Young Min
  • Yang, Kisung

Abstract

“BOXPI” is an acronym for the boxed Korea Composite Stock Price Index (KOSPI). Uniquely, KOSPI has remained within an extremely narrow range during 2012–2016 despite the global liquidity expansion. This study develops a continuous-time model to describe sector rotation and interprets the BOXPI phenomenon from industry portfolio perspectives. We find that the upper bound of the BOXPI can be interpreted as a consequence of the rotations from cyclical to defensive sector in the Korean stock market during that period. Furthermore, a Bayesian variable selection analysis shows that the lower bound of the BOXPI can be regarded as a result of low price-to-book ratio of the KOSPI in the BOXPI period.

Suggested Citation

  • Kim, Myeong Hyeon & Kim, Young Min & Yang, Kisung, 2022. "Understanding BOXPI — Industry portfolio perspectives," Journal of Asian Economics, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:asieco:v:81:y:2022:i:c:s1049007822000574
    DOI: 10.1016/j.asieco.2022.101500
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    More about this item

    Keywords

    Bayesian variable selection; BOXPI; Industry momentum; Sector rotation;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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