Is There a Stochastic Non-fundamental Trend in Korean Stock Price?: Inference under Transformed Error Correction Model

Is There a Stochastic Non-fundamental Trend in Korean Stock Price?: Inference under Transformed Error Correction Model

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In this paper, we test and estimate the stochastic non-fundamental trend in Korean stock market.For this, following Kim (2011), we exploit that the long-run equilibrium stock price may be decomposed into fundamental and stochastic non-fundamental trends (i.e., the sum of dividend innovations and a part that are Cyberterrorism as a global threat: a review on repercussions and countermeasures orthogonal with the dividend innovations) by using the Beveridge-Nelson decomposition and projections.

In this VAR construction, there is an error correction mechanism through which stock prices converge to their long-run equilibrium, which also contain the stated stochastic non-fundamental trend as well as fundamental trend.The estimation and test results using yearly data from the Korea (1976-2012) indicated that fluctuations in stock prices during that period can be explained mainly not by the stochastic non-fundamental trend but by the dividend trend.However, during some periods like after Seoul Olympic Games, we may observe the non-fundamental trend affected The Development of Knowledge Enrichment Books Concerning Ice and Snow Physical Studies for High-School Students to the stock price variation.