Table 4. Information of term spread and...

Table 4.

Information of term spread and its components with uncertainty in Korean stock market

Horizon	Const	D_{K_E}	KOR_TS	KOR_TS × D_{K_E}	Adj. R²	Horizon	Const	D_{K_E}	KOR_TS	KOR_TS × D_{K_E}	Adj. R²
Panel A: Term spread
n = 1	−0.0055		0.0132**		0.0198	n = 6	−0.0212		0.0640**		0.0775
	(−0.739)		(2.126)		0.0198		(−0.614)		(2.275)		0.0775
	0.0023	−0.0139	0.0068	0.0100	0.0142		−0.0249	0.0135	0.0557	0.0088	0.0726
	(0.255)	(−1.028)	(0.790)	(0.847)	0.0142		(−0.471)	(0.297)	(1.166)	(0.191)	0.0726
n = 3	−0.0141		0.0358**		0.0540	n = 12	−0.0154		0.0957**		0.0931
	(−0.684)		(2.104)		0.0540		(−0.285)		(2.484)		0.0931
	−0.0060	−0.0094	0.0204	0.0209	0.0491		−0.0493	0.0640	0.1186	−0.0379	0.0929
	(−0.196)	(−0.310)	(0.730)	(0.788)	0.0491		(−0.575)	(0.912)	(1.619)	(−0.583)	0.0929

Horizon	Const	D_{K_E}	KOR_TS	KOR_TS × D_{K_E}	Adj. R²	Horizon	Const	D_{K_E}	KOR_TS	KOR_TS × D_{K_E}	Adj. R²
Panel A: Term spread
n = 1	−0.0055		0.0132**		0.0198	n = 6	−0.0212		0.0640**		0.0775
	(−0.739)		(2.126)		0.0198		(−0.614)		(2.275)		0.0775
	0.0023	−0.0139	0.0068	0.0100	0.0142		−0.0249	0.0135	0.0557	0.0088	0.0726
	(0.255)	(−1.028)	(0.790)	(0.847)	0.0142		(−0.471)	(0.297)	(1.166)	(0.191)	0.0726
n = 3	−0.0141		0.0358**		0.0540	n = 12	−0.0154		0.0957**		0.0931
	(−0.684)		(2.104)		0.0540		(−0.285)		(2.484)		0.0931
	−0.0060	−0.0094	0.0204	0.0209	0.0491		−0.0493	0.0640	0.1186	−0.0379	0.0929
	(−0.196)	(−0.310)	(0.730)	(0.788)	0.0491		(−0.575)	(0.912)	(1.619)	(−0.583)	0.0929

Horizon	Const	D_{K_E}	KOR_TP	KOR_TP × D_{K_E}	KOR_RN	KOR_RN× D_{K_E}	Adj. R²	Horizon	Const	D_{K_E}	KOR_TP	KOR_TP × D_{K_E}	KOR_RN	KOR_RN× D_{K_E}	Adj. R²
Panel B: Term premium and risk-neutral expectation
n = 1	0.0040		0.0025				−0.0049	n = 6	0.0204		0.0175				0.0009
	(1.089)		(0.400)				−0.0049		(1.075)		(0.590)				0.0009
	−0.0024	0.0098	0.0119*	−0.0159			−0.0061		5.44 × 10⁻⁴	0.0360	0.0217	−0.0041			0.0033
	(−0.467)	(1.515)	(1.820)	(−1.555)			−0.0061		(0.027)	(1.473)	(0.601)	(−0.109)			0.0033
	0.0052				0.0117		0.0121		0.0311				0.0500		0.0398
	(1.162)				(1.233)		0.0121		(1.475)				(1.195)		0.0398
	7.26 × 10⁻⁴*	−0.0105			−0.0063	0.0456***	0.0689		0.0198	0.0126			0.0147	0.0757*	0.0576
	(1.685)	(−1.394)			(−0.896)	(3.045)	0.0689		(0.785)	(0.512)			(0.319)	(1.948)	0.0576
	−0.0035		0.0104*		0.0174*		0.0194		−0.0138		0.0536**		0.0796*		0.0823
	(−0.611)		(1.920)		(1.690)		0.0194		(−0.496)		(2.101)		(1.745)		0.0823
	−0.0037	−0.0052	0.0135*	−0.0068	0.0023	0.0401**	0.0681		−0.0286	0.0224	0.0599	−0.0141	0.0529	0.0586	0.0892
	(−0.516)	(−0.479)	(1.689)	(−0.666)	(0.252)	(2.354)	0.0681		(−0.733)	(0.640)	(1.466)	(−0.328)	(0.890)	(1.176)	0.0892
n = 3	0.0119		0.0063				−0.0038	n = 12	0.0313		0.0454				0.0185
	(1.154)		(0.366)				−0.0038		(0.851)		(1.090)				0.0185
	−0.0035	0.0265*	0.0160	−0.0148			−0.0067		−0.0077	0.0691*	0.0611	−0.0216			0.0269
	(−0.271)	(1.730)	(0.804)	(−0.679)			−0.0067		(−0.186)	(1.841)	(1.114)	(−0.418)			0.0269
	0.0149				0.0322		0.0375		0.0643**				0.0513		0.0197
	(1.211)				(1.252)		0.0375		(2.015)				(0.811)		0.0197
	0.0100	−7.42 × 10⁻⁴			−0.0017	0.0780***	0.0870		0.0451	0.0305			0.0182	0.0632	0.0258
	(0.729)	(−0.046)			(−0.065)	(2.707)	0.0870		(1.171)	(0.809)			(0.242)	(1.058)	0.0258
	−0.0085		0.0279*		0.0476*		0.0618		−0.0125		0.0916***		0.1020		0.0886
	(−0.526)		(1.892)		(1.688)		0.0618		(−0.265)		(2.637)		(1.558)		0.0886
	−0.0122	0.0018	0.0274	−0.0042	0.0158	0.0712**	0.0992		−0.0662	0.0843	0.1380**	−0.0696	0.1059	0.0068	0.0930
	(−0.528)	(0.073)	(1.143)	(−0.182)	(0.464)	(2.013)	0.0992		(−0.928)	(1.484)	(2.212)	(−1.179)	(1.134)	(0.093)	0.0930

Notes: The table reports estimates from predictive regressions of Korean stock market returns on term spread and its components with dummy variables of Korean EPU. All variable definitions are identical to those in Table 3, except for D_K_{_}_E. D_K_{_}_E is the dummy variable for high uncertainty periods. Horizon indicates predictive months of future stock market returns. Panels A and B report the results of term spread and its components, respectively. Newey and West (1987) corrected t-statistics are reported in parentheses. *, ** and *** represent significance at the 10, 5 and 1% levels, respectively

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