DJI and NIKKEI have no significant short-term impact on KOSPI.
Hang Seng (HSI) and Nasdaq (NASDAQ) do influence KOSPI in the short term.
Oil prices (WTI) and the KRW/USD exchange rate significantly impact KOSPI movements.
KOSPI is primarily influenced by its own market dynamics rather than external shocks.
Shocks from Nasdaq, Hang Seng, and exchange rates do have some influence, but to a lesser extent.
Opinion
This study provides empirical evidence that while the Korean stock market is connected to global financial markets, its short-term movements are more influenced by domestic factors than by major indices like DJI or Nikkei. The stronger influence of Nasdaq suggests that Korea’s stock market is more aligned with tech-related global trends, while the Hang Seng’s influence indicates Korea’s deep economic ties with China.
The positive impact of KRW depreciation on KOSPI highlights the strong export dependency of Korea’s economy. However, given that KOSPI reacts more significantly to its own market shocks, investors should focus more on domestic economic conditions and policy changes rather than external market trends.
Core Sell Point
While global factors such as Hang Seng, Nasdaq, and exchange rates do impact KOSPI, the Korean stock market is primarily driven by its own internal dynamics, making domestic economic conditions and policy changes the most critical factors for investors to monitor.
Summary of the Study: "Stock Price Dynamic Behavior in Selected Global and Korean Capital Markets"
This study analyzes the factors driving the movements of the Korean stock market (KOSPI) and investigates its relationship with major global stock markets, including the U.S. (Dow Jones & Nasdaq), Japan (Nikkei), Hong Kong (Hang Seng), and China.
Key Findings
1. Differences in the Influence of Global Stock Markets on KOSPI
U.S. (Dow Jones Industrial Average - DJI):
No significant short-term impact on the Korean stock market.
This suggests that the overall U.S. economic condition is not directly reflected in KOSPI.
However, this study covers data only from 1987 onwards, so the impact before that period remains unknown.
Japan (Nikkei 225 - NIKKEI):
Like DJI, it does not exert a significant short-term influence on KOSPI.
This could be due to geopolitical and policy-related differences between the two economies.
Hong Kong (Hang Seng Index - HSI):
Has a positive short-term impact on KOSPI.
This reflects Hong Kong's close economic ties with Korea and its strong link to the Chinese economy.
U.S. (Nasdaq Composite - NASDAQ):
Has a positive short-term impact on KOSPI.
Since Nasdaq is tech-heavy, its influence may be attributed to the strong Korea-U.S. partnership in the tech sector.
2. Impact of Macroeconomic Variables
Oil Prices (WTI) and Exchange Rate (KRW/USD):
Both factors have a significant short-term impact on KOSPI.
Positive Effect of Exchange Rate Movements:
KRW depreciation (higher KRW/USD exchange rate) tends to benefit the Korean stock market.
A weaker Korean Won increases price competitiveness of Korean exports, boosting corporate earnings.
3. Shock Response Analysis
Own Shock Effect:
KOSPI is most affected by its own movements, meaning that it reacts more strongly to domestic factors than external ones.
Other Influential Factors:
KOSPI is somewhat affected by movements in the Hang Seng Index, Nasdaq, and exchange rate, but their influence is smaller compared to domestic shocks.
Conclusion & Investment Implications
KOSPI is integrated with global financial markets, but the influence of certain indices (DJI & Nikkei) on its short-term movement is limited.
Hang Seng and Nasdaq have a more noticeable impact, suggesting that China-related economic trends and the tech industry play a critical role in shaping Korea’s stock market movements.
KRW/USD exchange rates are a crucial factor, reinforcing Korea’s export-driven market dependency.
Domestic factors remain the primary driver of KOSPI, implying that domestic economic conditions and policy changes are more influential than global trends in determining market performance.
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