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Measuring the effect of the North Korea-U.S. summit on the South Korean stock market

Author

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  • Huy Pham
  • Osama Al-Hares
  • Vikash Ramiah
  • Nisreen Moosa

Abstract

We examine the effects of the North Korea-U.S. summit and related events on the South Korean stock market over the period March 2018 to June 2018. Employing the event study methodology, we estimate sectoral abnormal returns following the events surrounding the summit and conduct several robustness tests to control for market integration and firm-specific information. Furthermore, we assess how sectoral systematic risk changes following these events by using various ARCH-type models such as GARCH, TARCH, EGARCH and PARCH. The results show that the South Korean stock market was highly sensitive to these events. In particular, we find that the market was negatively affected by the news that could reduce the probability of holding the summit and vice versa. We also find that market scepticism about the summit leads to the rise of a diamond risk structure.

Suggested Citation

  • Huy Pham & Osama Al-Hares & Vikash Ramiah & Nisreen Moosa, 2019. "Measuring the effect of the North Korea-U.S. summit on the South Korean stock market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1690212-169, January.
    • Handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1690212
    DOI: 10.1080/23322039.2019.1690212
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    Cited by:

    1. Stephens, John & Mehdian, Seyed & Gherghina, Ștefan Cristian & Stoica, Ovidiu, 2023. "The reaction of the financial market to the January 6 United States Capitol attack: An intraday study," Finance Research Letters, Elsevier, vol. 56(C).
    2. Sunkung Choi, 2023. "Measuring economic diplomacy using event study method: the case of EU-China summit talks and Airbus stock price changes," Asia Europe Journal, Springer, vol. 21(2), pages 155-171, June.

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