Target Over night Call Rateand Stock Market Returns

Evidence From Korea

Authors

  • Antonio Rafael Rodriguez Abraham Universidad César Vallejo, Perú

Keywords:

Stock market returns, Surprise component, Target overnight call rate, Realized overnight call rate

Abstract

This research attempts to contribute to the practitioner and academic on the effect of target overnight call rate changes on stock market returns in Korea in the period 2000-2007.Thus,the paper applies event studies methodology in order to observe the reaction of Korea Composite Stock Price Index (KOSPI) returns to surprises in monetary policy announcements as regards to changes or maintenance in the target overnight call rate. The study is based on the efficient market hypothesis, indicating that the market reacts to unexpected decisions of the Monetary Policy Committee(MPC). Also, following the studies of Kuttner(2000),the paper constructs the surprise component by using realized overnight call rate. The evidence shows that in the short-run, market returns have strong negative relationship with unexpected changes in the target overnight call rate in Korea.

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Published

2014-06-30

How to Cite

Rodriguez Abraham, A. R. (2014). Target Over night Call Rateand Stock Market Returns: Evidence From Korea. UCV-Scientia, 6(1), 66–76. Retrieved from https://revistas.ucv.edu.pe/index.php/ucv-scientia/article/view/1116

Issue

Vol. 6 No. 1 (2014): January - June

Section

Management Sciences

License

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