An Empirical Study on the Effects between the Spain's IBEX and South Korea's KOSPI
Authors:   Asia-Europe Perspective Association, Yim Byung-Jin 
Published: December 2024

This article examine on the mutual influence between Spanish stock index(IBEX) and Korean stock index(KOSP!) in South Korea. This study used 256 Spanish stock indices and Korean stock indices from January 5, 2018 to November 24, 2022 to analyze the mutual effect between the Korean and Spanish stock markets. The analysis was conducted using weekly time series data of the Korean stock index. A literature review was also conducted to supplement the empirical research method. The stability of the time series was determined using a unit root test on the Spanish and Korean stock indices, while a cointegration test was used to determine the existence of a long-term and stable relationship between the two variables. The study also employed the variance decomposition method of prediction error using a VAR model of Korean and Spanish stock indices, impact response analysis of Korean and Spanish stock indices, and Granger causality test of Korean and Spanish stock indices for mutual influence analysis between variables. All the weekly time series data analyses of the Spanish and Korean stock markets were performed using Eviews version 7.0. The important results of the study on the Korean and Spanish stock indices are summarized as follows.
The study yielded several important results. Firstly, stability tests for the level variables of the Spanish and Korean stock indices showed instability, whereas stability was observed for the difference variable data. Secondly, cointegration was found to be absent between the level variables of the Spanish and Korean stock indices, but a stable cointegration relationship was identified for the difference variables. Thirdly, the correlation between the weekly time series data of the Spanish and Korean stock indices was weakly positive, with a value of 0.086623, although a low correlation does not necessarily indicate the absence of Granger causality. Fourthly, the variance decomposition analysis showed that changes in the Korean stock index accounted for more than 95.23% of its inherent changes, with less than 4.77% of the explanatory power attributed to the Spanish stock index. Conversely, changes in the Spanish stock index explained over 61.99% of its intrinsic changes, with more than 38.44% of the explanatory power attributed to the Korean stock index. Finally, the study found that changes in the Spanish stock index had a Granger causal relationship with changes in the Korean stock index at a significance level of 1%, implying that fluctuations in the Spanish stock index have a causal effect on the Korean stock index's fluctuations.
A limitation of the study conducted on the Spanish and Korean stock markets is the insufficient availability of diverse data. In order to conduct a thorough analysis of the mutual impact between these two markets, it is essential to consider and analyze various data sources beyond stock index data. Unfortunately, thus far, there has been a lack of available data beyond stock indices for both markets. Therefore, the analysis was limited to the use of the Spanish and Korean stock index data. However, if various types of data on these markets become available in the future, it would be crucial to conduct a more detailed analysis utilizing such data to gain a comprehensive understanding of the Spanish and Korean stock markets.