Yang-Kyu Shin

(Daegu Hanny University, South Korea)

 

 

Abstract: Foreign investment in rising nations affect not only the domestic stock market globally but also the domestic investors. Korea first opened its stock market in 1992, and, in 1998, except for several public corporations, it completely opened the stock market by abolishing the limit on foreign stock investment. This study aims to gain better understanding of how the opening of stock market affects domestic investors. Data from the Korean stock market spanning from year 1993 to 2004 were analyzed to determine the correlation of stock trading values between foreign investors and domestic investors. Analysis showed significant correlation (p-value 0.000) over the entire study period. However, when analyzed by dividing the period into years 1993-1998 and 1999-2004 based on the point of complete opening of the stock market, there is no significance (5% level of significance) between foreign investors and domestic investors. Yet, upon analysis per type of domestic investors (4 groups), following complete opening of the market, the institutional investor type exhibits significantly positive correlation (p-value 0.012) in relation to foreign investors.

 

 

Key word: open stock market; foreign investment; domestic investors; correlation; Korean stock market

 

JEL codes: G140