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Can Behavioral Models Explain the behavior of Korean Stock Prices?

Title
Can Behavioral Models Explain the behavior of Korean Stock Prices?
Author
길재욱
Keywords
Structural VAR; tangible information; intangible information; Dividend discount model; Residual income model
Issue Date
2004-12
Publisher
한국증권학회
Citation
증권학회지(Asia-Pacific Journal of financial studies), v.33, No.4, Page.247-276
Abstract
We investigated whether existing behavioral models can sufficiently explain the behavior of Korean stock prices, especially such behaviors as the observed short-horizon continuation and long-horizon reversals in KOSPI returns. To accomplish this purpose, we used Lee`s (2003) identification method of tangible and intangible shocks based on a structural VAR model in order to evaluate the conventional dividend discount model and the residual income model. In this study, we could observe Korean investors` tendency to overreact to intangible information and to underreact initially to tangible information, with no significant reversal associated with tangible information in the long run. These findings are similar to those observed in the U.S. They are compatible with the predictions of behavioral models that incorporate overconfidence of investors in their private information. As a result of this study, we could also ascertain that the residual income model provides a better valuation tool than the dividend discount model for the KOSPI returns.
URI
http://www.dbpia.co.kr/journal/articleDetail?nodeId=NODE07227996&language=ko_KRhttps://repository.hanyang.ac.kr/handle/20.500.11754/154774
ISSN
2005-8187
Appears in Collections:
COLLEGE OF BUSINESS AND ECONOMICS[E](경상대학) > BUSINESS ADMINISTRATION(경영학부) > Articles
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