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Korea’s stock market volatility : Assessment and implications

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  • Korea’s stock market volatility
  • Kim, Joon-Seok
  • Korea Capital Market Institute


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Title Korea’s stock market volatility
Similar Titles
Sub Title

Assessment and implications

Material Type Reports
Author(English)

Kim, Joon-Seok

Publisher

[Seoul]:Korea Capital Market Institute

Date 2013-06
Series Title; No Capital Market Opinion
Pages 5
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Holding KCMI

Abstract

Volatility comprises of two components: fundamental volatility from changes in asset values, and transitory volatility caused by trading activities. Although Korea’s stock market volatility decreased dramatically over the past decade, the relative proportion of transitory volatility in the total volatility is still higher than other markets. Lowering transitory volatility in Korea’s stock market requires more fundamental, long-term endeavors, for example, increasing the portion of institutional investors, promoting long-term investments and diversifying investment strategies to increase information-based trading and to decrease delays in price discovery, market overreaction, and irrational investments. Furthermore, the current daily price limit system which is the last resort for controlling volatility should be changed to a volatility interruption mechanism. Last, the market needs more diverse derivatives to effectively respond to volatility.