Investment implications of the korean financial market reform

Abstract

This paper investigates if the Korean equity market has any structural relationship with other stock markets in Asia and the industrialized world. Unlike earlier studies, this one places emphasis on the Korean equity market relative to other markets in the sample. The numerical taxonomy technique is applied to investigate if the Korean index exhibits a short-run comovement with the other indexes in the sample. The results indicate some comovement between the Korean and the Japanese indexes. The comovement with the U.K. and U.S. indexes is slight with no consistent pattern. On the long-run, the pairwise cointegration test indicates that there is no consistent structural relationship between the Korean stock market and any of the sampled indexes.