Market coupling: an empirical study of the Sino-Korean game industry


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This study aims to examine the relationship between the Korean and Chinese game industries, and more broadly, the Chinese stock market. Chinese firms are the most important partners and investors in the Korean game industry, which has emerged as a significant component of a thriving Korean economy. The paper examines the impact of growth in the Chinese game industry on the Korean market and the correlation and cointegration between the stock returns of nineteen Korean game companies, the Chinese stock market, and Chinese game companies. A portfolio constructed from Korean game companies listed on the KOSPI and KOSDAQ is analyzed. Variation in the Shanghai Composite Index is shown to significantly influence the performance of Korean game companies. Further, the Korean game industry is sensitive to changes in the stock price of leading Chinese game publishers. The Korean game industry returns more closely mirror the returns of the Chinese stock markets rather than the Korean markets, evidence of the influence of China. As growth and returns in the Korean game industry are closely related to the performance of the Chinese market, future performance is subject to political and economic changes in China.

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    • Figure 1. Market size of the Chinese game industry (unit: hundred million Yuan)
    • Figure 2. Market size of the Chinese mobile game industry (unit: hundred million Yuan)
    • Figure 3. Cumulative returns for KOSPI, KOSDAQ, Shanghai index, Shenzhen index, and Korean game companies’ portfolio
    • Figure 4. Cumulative returns for Korean and Chinese game industry portfolios
    • Table 1. Chinese game companies ranked by total sales
    • Table 2. 2018 rank of PC games in China
    • Table 3. 2018 Rank of mobile games in China
    • Table 4. Descriptive statistics
    • Table 5. Correlation coefficients
    • Table 6. Engle-Granger cointegration tests (Jan. 2000 – Dec. 2017)
    • Table 7. Regressions of ROE on annual SSE composite index return
    • Table 8. Monthly performance of NetEase and Tencent
    • Conceptualization
      Jung Woon Park, Seungho Baek, Seok Hee Oh
    • Investigation
      Jung Woon Park
    • Methodology
      Jung Woon Park, Seok Hee Oh
    • Project administration
      Jung Woon Park, Seungho Baek
    • Resources
      Jung Woon Park, Seok Hee Oh
    • Supervision
      Jung Woon Park, Seungho Baek, Mina Glambosky
    • Visualization
      Jung Woon Park
    • Writing – review & editing
      Jung Woon Park, Seungho Baek, Mina Glambosky, Seok Hee Oh
    • Data curation
      Seungho Baek
    • Formal Analysis
      Seungho Baek
    • Validation
      Seungho Baek, Mina Glambosky
    • Writing – original draft
      Seungho Baek, Mina Glambosky, Seok Hee Oh
    • Funding acquisition
      Seok Hee Oh