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Do S&P 500 and KOSPI Move Together?: A Functional Regression Approach

Author

Listed:
  • Soobin Kim

    (Michigan State University)

  • Chang Sik Kim

    (Sungkyunkwan University)

Abstract

This paper explores the return comovement between Korean and U.S. stock markets by investigating the existence of a possible spillover effect using high frequency data. We employ a functional regression methodology to scrutinize the moment dependence and the components of possible spillover effects. We find that the mean, volatility, skewness, and kurtosis spillover effects exist and the components of those effects have not changed over time in 2002-2006. In sum, we conclude that the KOSPI and S&P 500 move together during the sample period. The conclusion, however, is weakened once we modified the data by excluding the opening price of KOSPI since we only find the volatility spillover effect during the same period. Therefore, we can conclude that the opening price of Korean stock market may reflect new information that occurred overnight in foreign markets so that moment dependencies or moment spillover effects are weakened between Korean and U.S. stock market.

Suggested Citation

  • Soobin Kim & Chang Sik Kim, 2010. "Do S&P 500 and KOSPI Move Together?: A Functional Regression Approach," Korean Economic Review, Korean Economic Association, vol. 26, pages 401-430.
    • Handle: RePEc:kea:keappr:ker-20101231-26-2-07
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    References listed on IDEAS

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    Cited by:

    1. Ahmed, Walid M.A., 2022. "On the higher-order moment interdependence of stock and commodity markets: A wavelet coherence analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 83(C), pages 135-151.

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    More about this item

    Keywords

    Stock Market Comovement; Spillover Effect; Market Efficiency; Functional Regression; Moments Dependency;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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