Effect of World Events on Responsive Volatility of South Korea Stock Market: Exponential GARCH Approaches

This article examines responsive volatility and its determinants of Korea Stock Price. We consider country-specific ‘economic’ and ‘non-economic’ events for estimating our stock model using daily data, the Korea Composite Stock Price Index(KOSPI) from January 2nd 2003 to December 30th 2008, a total of 1485 observations. Based on the exponential generalized autoregressive heteroskedasticity model(EGARCH), the evidence shows that there exits leverage and asymmetric effects for Korea stock markets, and the relative responses of country-specific shocks are varied. Moreover, our finding illustrates that Korea stock market would be more rely on either positive or negative shocks from the U.S. than from the Japan. In other words, our study is contrary to what decouplers would have expected.