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http://dx.doi.org/10.18807/jsrs.2016.6.3.041

Does the Business Survey Index of the Federation of Korean Industries at the Service Industry Lead the domestic stock market ?  

Kim, Joo Il (Dept. of Business Administration, Kyonggi University)
Kim, Byoung ryul (pension plan research center, Teachers Pension)
Publication Information
Journal of Service Research and Studies / v.6, no.3, 2016 , pp. 41-54 More about this Journal
Abstract
We examine the information transmission between the business survey index(BSI) based on the returns data offered by Federation of Korean Industries and KOSPI Index based on the returns data offered by Korea Bank. The data includes monthly return data from January 1998 to September 2015. The results of the analysis are as follows. Firstly, results of Granger Causality test suggests the existence of mutual causality KOSPI Index precede and have explanatory power BSI. Secondly, the results of impulse response function suggest that BSI Index show immediate response to KOSPI Index and are influenced by till time 4 From time 2 the impact gradually disappears. Also KOSPI Index show immediate response to BSI and are influenced by till time 4 From time 2 the impact gradually disappears. Lastly, the variance decomposition analysis showed a high influence of the KOSPI Index on the BSI and significant influence of the BSI on the KOSPI Index. This implies that returns on the KOSPI Index have a significant influence over returns on the BSI. The study is a further extension of existing studies on information transmission mechanism between the BSI and KOSPI. Finally, our results can be used as a guide by the Korea Bank and Republic of Korea and as well as Federation of Korean Industries.
Keywords
Service Industry; BSI; KOSP I; VAR; Granger Causality Test;
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