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논문검색

What Explains the Idiosyncratic Volatility in the Korean Stock Market?

원문정보

초록

영어

Using the Fama and French (1993) three-factor model, this paper provides an explanation for the variation of idiosyncratic return in the Korean stock market over the period of 1990-2012. There had been an upward trend until 1999 in idiosyncratic volatility and its trend has been reversed afterwards. Our analysis yields three main results. Firstly, it appears that all four explanatory variables, two fundamentals related variables of the variance of return on equity and a proxy of growth options and two trading volume related variables of trading volume and foreign ownership ratio, explain considerable proportion of idiosyncratic return variation. Most interestingly, foreign investors have stabilizing effect on firm-specific risk in the Korean stock market. Secondly, a firm’s characteristics such as size and export orientation exert some influence on idiosyncratic volatility. Lastly, the absolute and relative explanatory powers of the four explanatory variables vary through time and diminish as the sample period ends, implying the need to search for further explanatory variables.

목차

Abstract
 I. Introduction
 II. A Brief Review of Relevant Literature
 II. Data and Methodology
  1. Data Sources
  2. Idiosyncratic Volatility
  3. Explanatory Variables
 IV. Results and Discussion
  1. Tests for Structural Break
  2. Univariate Regressions
  3. Multivariate Regressions
  4. Effects of Size and Export on Idiosyncratic Volatility
  5. Change in Explanatory Power
 IV. Concluding Remarks
 Appendix
 References

저자정보

  • Sangkyu Lee Kyung Hee University, Seoul, Korea
  • Anna Moon Kyung Hee University, Seoul, Korea

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