Abstract
This study aims to examine the relationship between the Korean and Chinese game industries, and more broadly, the Chinese stock market. Chinese firms are the most important partners and investors in the Korean game industry, which has emerged as a significant component of a thriving Korean economy. The paper examines the impact of growth in the Chinese game industry on the Korean market and the correlation and cointegration between the stock returns of nineteen Korean game companies, the Chinese stock market, and Chinese game companies. A portfolio constructed from Korean game companies listed on the KOSPI and KOSDAQ is analyzed. Variation in the Shanghai Composite Index is shown to significantly influence the performance of Korean game companies. Further, the Korean game industry is sensitive to changes in the stock price of leading Chinese game publishers. The Korean game industry returns more closely mirror the returns of the Chinese stock markets rather than the Korean markets, evidence of the influence of China. As growth and returns in the Korean game industry are closely related to the performance of the Chinese market, future performance is subject to political and economic changes in China.
Highlights
After the 1997 Asian financial crisis, the source of Korean economic growth shifted from labor and capital intensive manufacturing businesses to information-technology (IT) value-added businesses
Chinese firms are the most important partners and investors in the Korean game industry, which has emerged as a significant component of a thriving Korean economy
The paper examines the impact of growth in the Chinese game industry on the Korean market and the correlation and cointegration between the stock returns of nineteen Korean game companies, the Chinese stock market, and Chinese game companies
Summary
After the 1997 Asian financial crisis, the source of Korean economic growth shifted from labor and capital intensive manufacturing businesses to information-technology (IT) value-added businesses. Given the consistencies between the two game industries, we examine whether the stock prices of Korean game companies are affected by changes in the Chinese stock market performance. Market accessibility have (2010) find a strong co-movement relationship bebeen identified as influential both in China and tween Korean and Chinese stock markets. Foreign stock markets are sensitive to the release Their success has served as an example for Korean of the U.S macroeconomic news, and those mar- game companies and has sparked an increased ket movements are related even after controlling focus on the Chinese market.
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