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    The COVID-19 and Stock Return Volatility: Evidence from South Korea

    Pyo, Dong-Jin | June 2021
    Abstract
    This study examines the impact of the number of coronavirus cases on regime-switching in stock return volatility. This study documents the empirical evidence that the COVID-19 cases had an asymmetric effect on the regime of stock return volatility. When the stock return is in the low volatility regime, the probability of switching to the high volatility regime in the next trading day increases as the number of cumulative cases increases. In contrast, in the high volatility regime, the effect of cumulative cases on the transition probability is not statistically significant. This study also documents the evidence that the government measures against the pandemic contribute to promoting the high volatility regime of the KOSPI during the pandemic. Besides, this study projects future stock prices through the Monte Carlo simulation based on the estimated parameters and the predicted number of the COVID-19 new cases. Under a scenario where the number of new cases rapidly increases, stock price indices in Korea are expected to be in a downward trend over the next three months. On the other hand, under the moderate scenario and the best scenario, the stock indices are likely to continue to rise.
    Citation
    Pyo, Dong-Jin. 2021. The COVID-19 and Stock Return Volatility: Evidence from South Korea. © Korea Institute for International Economic Policy. http://hdl.handle.net/11540/13874.
    ISSN
    PISSN 2508‐1640
    EISSN 2508‐1667
    Keywords
    Public Financial Management
    Financial System
    Financial Statistics
    Financial Stability
    Financial Management System
    Financial Restructuring
    Capital Market Development
    Market Development
    Economics
    Erosion
    International Economics
    Macroeconomic
    Macroeconomic Analysis
    Performance Evaluation
    Impact Evaluation
    Foreign and Domestic Financing
    Foreign Direct Investment
    Financial Statements
    Pension Funds
    Mutual Funds
    Social Equity
    Financial Aspects
    Fiscal Policy
    International Financial Market
    Multilateral Financial Institutions
    Economic Recession
    Market
    Crisis
    Economic indicators
    Growth models
    Gross domestic product
    Macroeconomics
    Economic forecast
    Business Financing
    Investment Requirements
    Digital currency
    Labour market
    Income Inequality
    Labor policy
    Manpower policy
    Business recessions
    Multilateral development banks
    Regulatory reform
    Capital
    Exports
    Economic development projects
    Economic policy
    Economic forecasting
    Investment Requirements
    Banks
    International banks and banking
    Capital movements
    Central banks and banking
    Bills of exchange
    Swaps
    Banks and banking
    Financial crisis
    Credit control
    Credit allocation
    Capital market
    International liquidity
    Liquidity
    Exchange rate
    Pension plans
    Individual retirement accounts
    Employee pension trusts
    Investment management
    Investments
    Multiemployer pension plans
    Keogh plans
    Individual retirement accounts
    Pension plans
    Employee pension trusts
    Pension trusts
    Stocks
    Stock return volatility
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    Citable URI
    http://hdl.handle.net/11540/13874
    Metadata
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    Thumbnail
    04Dong-JinPyo.pdf (1.451Mb)
    Author
    Pyo, Dong-Jin
    Theme
    Finance
    Economics
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise