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A Dynamic Competition Analysis of Stock Markets

Author

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  • Seong-Tae Hwang
  • Seong-Joon Lee
  • Hyung-Sik Oh

Abstract

This paper analyses the dynamic competition relationships of stock markets in Korea and the United States. The Lotka-Volterra system of equations, one of well-known competitive diffusion models, is adopted to represent the competitive situations of the Korean and US stock markets and it is empirically estimated using daily index data. The results show that in Korea, there existed a predator-prey relationship between KSE and KOSDAQ at the entry of KOSDAQ, and the interaction has remained unchanged during the study period. In the US, the entry of NASDAQ has had little effect on the NYSE but this effect has extended to symbiotic relationships and predator-prey relationship between the two stock markets. This article shows what differences lie in the relationships between first mover and new entrant, comparing the relatively mature US stock markets with the newly constructed Korean stock markets.

Suggested Citation

  • Seong-Tae Hwang & Seong-Joon Lee & Hyung-Sik Oh, 2005. "A Dynamic Competition Analysis of Stock Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 4(1), pages 1-25, April.
    • Handle: RePEc:sae:emffin:v:4:y:2005:i:1:p:1-25
    DOI: 10.1177/097265270400400101
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    Cited by:

    1. McInerney, Niall, 2019. "Macroprudential Policy, Banking and the Real Estate Sector," MPRA Paper 91777, University Library of Munich, Germany.

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