This project studies recent Asian financial crisis and development of over-the-counter stock markets in Asian countries. The project consists of two parts. In the first part, we attempt to better understand the nature of the Asian financial crisis experienced by Thailand, Indonesia, and Korea by employing a rigorous time-series analysis. In the second part, we try to better understand the dynamic relations between stock exchange prices and OTC market prices using various dynamic time-series techniques.
First, we explore whether the recent decline in Asia’s stock market prices was primarily due to fundamental factors. We develop a new method that allows us to decompose asset prices simply based on a regression of asset prices on various fundamental variables, which may constitute a methodological contribution of this paper. To be more realistic about the information used in computing the decomposition, we employ updating method in regressions with time-varying coefficients as well as usual time-constant coefficient regressions. The results are that although we find some evidence of substantial non-fundamental components in the four national stock market prices, the non-fundamental components do not appear to be a bubble except for Japan.
Next, we explore the relationship between stock exchange prices and OTC market prices. The results from various dynamic time-series techniques show that although stock exchange prices and OTC market prices have strong contemporaneous correlations, they are not cointegrated in the time-series sense, implying that they may diverge from each other over time. As expected, the NYSE market tends to lead the other two countries’ market prices without being Granger-caused by other countries’ stock exchange markets. However, Korean market (both KOSPI and KOSDAQ) returns and JASDAQ returns on the same day help predict NYSE returns, which is somewhat surprising. The NASDAQ market tends to have information about all other markets except the NYSE. Its returns are, however, Granger ?caused by KOSDAQ returns. KOSPI returns are Granger-caused by NASDAQ, NYSE, JASDAQ, and KOSDAQ returns, and KOSDAQ returns are Granger-caused by NASDAQ, KOSPI, and JASDAQ returns. We also find that in the post-2000 period, exchange market returns and OTC returns tend to move more closely than the pre-2000 period in Korea and Japan, but less closely in the U.S.
A study of Asian financial crisis and Asian over-the-counter market
[Seoul]:Korea Institute of Finance
|Series Title; No||금융조사보고서 / 2001-03|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics
Economy < Financial Policy
|Holding||kif; KDI School|