Kim, Sang Bong (2008-08). Essays on Asset Prices. Doctoral Dissertation. Thesis uri icon

abstract

  • In this dissertation I explain the relationship among inflation volatility, rational bubbles, and asset prices. In addition, I investigate the transmission of asset prices and volatility among countries. In the second chapter, which deals with the relationship between inflation volatility and asset prices, my empirical analysis shows that real stock returns tend to co-vary negatively with expected inflation during periods of stable inflation, but co-vary positively with expected inflation during periods of volatile inflation for 16 countries. To investigate the relationship between rational bubbles and asset prices in the third chapter, I formulate an information error model which allows one to derive the measure of non-fundamentals in stock prices in a straightforward manner. This study provides a new method by specifying rational bubble measures that follow the Weibull distribution. As a result, my empirical analysis is the first step in applying survival analysis to bubbles, and it reveals preliminary evidence that there is the increasing bursting rate at a decreasing rate for extraneous or instrinsic bubbles in the U.S. stock market. In the fourth chapter, which deals with the transmission of asset prices and volatility, I investigate how the 1997 crisis has changed the Korean market by focusing on price and volatility spillovers from the U.S., Chinese, and Japanese markets. I have used daily stock prices from January 3, 1995 to July 31, 2007 and employed an EGARCH model. New information on stock prices originated in the U.S. market was more transmitted to the Korean market for all periods. The price spillover effect from the Japanese market to the Korean market became stronger from the crisis period. The influence of U.S. and Japanese innovations on market volatility increased after the crisis period. However, the magnitude of spillover effects from the Chinese market to the Korean market remained small and stable between the prior- and post-crisis periods and the volatility spillover effect remained stable for all periods. Asymmetry in the spillover effects on market volatility was pronounced in the Korean market after the financial crisis.
  • In this dissertation I explain the relationship among inflation volatility, rational

    bubbles, and asset prices. In addition, I investigate the transmission of asset prices and

    volatility among countries.

    In the second chapter, which deals with the relationship between inflation volatility

    and asset prices, my empirical analysis shows that real stock returns tend to co-vary

    negatively with expected inflation during periods of stable inflation, but co-vary

    positively with expected inflation during periods of volatile inflation for 16 countries.

    To investigate the relationship between rational bubbles and asset prices in the third

    chapter, I formulate an information error model which allows one to derive the measure

    of non-fundamentals in stock prices in a straightforward manner. This study provides a

    new method by specifying rational bubble measures that follow the Weibull distribution.

    As a result, my empirical analysis is the first step in applying survival analysis to

    bubbles, and it reveals preliminary evidence that there is the increasing bursting rate at a

    decreasing rate for extraneous or instrinsic bubbles in the U.S. stock market. In the fourth chapter, which deals with the transmission of asset prices and volatility,

    I investigate how the 1997 crisis has changed the Korean market by focusing on price

    and volatility spillovers from the U.S., Chinese, and Japanese markets. I have used daily

    stock prices from January 3, 1995 to July 31, 2007 and employed an EGARCH model.

    New information on stock prices originated in the U.S. market was more transmitted to

    the Korean market for all periods. The price spillover effect from the Japanese market to

    the Korean market became stronger from the crisis period. The influence of U.S. and

    Japanese innovations on market volatility increased after the crisis period. However, the

    magnitude of spillover effects from the Chinese market to the Korean market remained

    small and stable between the prior- and post-crisis periods and the volatility spillover

    effect remained stable for all periods. Asymmetry in the spillover effects on market

    volatility was pronounced in the Korean market after the financial crisis.

publication date

  • August 2008