The first objective of this study is to examine the information transmission between the Korean stock markets and the American stock markets. The analysis employs the vectorautoregression, Granger causality, impulse response function and variance decomposition using daily returns on both the national stock market indices and non-national stock market indices.
The findings in this paper indicate that the American stock market index returns have predictive power for the Korean stock market index returns from Granger causality test. Empirical results show that the U.S. markets do not affect the Korean stock markets before IMF crisis. But, the Korean stock markets are strongly affected by the U.S. markets after IMF crisis.
