Article ID: | iaor20051813 |
Country: | South Korea |
Volume: | 29 |
Issue: | 1 |
Start Page Number: | 31 |
End Page Number: | 42 |
Publication Date: | Mar 2004 |
Journal: | Journal of the Korean ORMS Society |
Authors: | Kim Tae-Ho, Park Ji-Won, Kim Mi-Yun |
Keywords: | investment |
This study analyzes the structure of the variations in the domestic bank earnings and examines their dynamic features by estimating the short-run response and the long-run adjustment process after the changes in financial market variables. A system of the equations for the bank stock price index and KOSPI is formulated to utilize the whole information in the market and simultaneously estimated to identify the relationships between the market variables and the bank earnings. Since the bank stock price is found to be responsive to changes in none of the market variables in the short run, while being relatively responsive to dollar exchange rate and business state, it implies that good economic conditions and a stable foreign exchange rate should be maintained to improve the level of the stock price in the long run. In addition, the dynamic structure of the responses of the bank stock price index and KOSPI to the initial changes in the market variables are compared and analyzed. The response of the bank stock price appears to take much longer in adjusting to the long-run equilibrium level than that of KOSPI. As a result, the cumulative response of the bank stock price index over time is found much bigger than that of KOSPI.