Book review 'Time for empirical study of Korean stock market'
By Park Si-soo
There is a bunch of guide books analyzing anomalies in the South Korea stock market. The rub is, however, most are merely focused on verifying if some anomalies of foreign stock markets occur also in the Korea.
As a result, empirical analyses using a Korean dataset are not well known to the international investment communities and academia. In many foreign countries, on the contrary, research results based on thorough analysis of stock markets are used by the investment communities concerned to produce more reliable and empirical analysis, and vice versa. A case in point is the so-called Halloween effect, an investment technique in which an investor sells stocks before May 1 and refrains from reinvesting until October 31 in order to increase capital gains.
In South Korea, however, there are few intellectual bridges between the academic and investment communities, which is basic motive for the authors to write this book -- “Analyses of The Korean Stock Market: Behavioral Finance Approaches.”
The co-authors -- Professor Kim Keun-soo of the Graduate School of Pan-Pacific International Studies at Kyung Hee University in Seoul, and Professor Byun Ji-hyun of the Finance at Business School at Ehwa Womans University in Seoul -- focus on analyzing anomalies in the Korean stock market, including time series anomalies such as the January effect; cross-sectional anomalies like the size effect and book-to-market effect; and anomalies related to corporate events.
In most analyses, the authors document anomalies without controlling risk. They put a focus on determining whether anomalies exist and persist in terms of raw returns, so that if an investor is pursuing good investment performance from a long-term perspective, this book will be attractive.
The book also delves into ways of examining the trading behavior of investor types with regard to anomalies and corporate events, offering a distinctive opportunity to understand the real behavior of investor types in Korea. This book also deals with a wide range of investment subjects with a unique data sample that is not available in the United States, because the dataset of the Korea Exchange provides daily buying and selling value and volume of investor types for every stock listed on the KOSPI market.
The book is categorized into six chapters: 1) Korean Capital Market, 2) Behavioral Approaches, 3) Seasonal Anomalies, 4) Cross-sectional Anomalies, 5) Corporate Event, 6) Industry Analysis.
This book is recommended for professional investors, as the authors' in-depth research will provide a broader picture of anomalies in the Korean stock market.