Table 10. Information of term spread and...

Table 10.

Information of term spread and its components with uncertainty in Korean and US stock markets: top 25% uncertainty dummy variable

Horizon	Const	D^Q_{K_E}	KOR_TP	KOR_TP × D^Q_{K_E}	KOR_RN	KOR_RN × D^Q_{K_E}	Adj. R²
Panel A: Term premium and risk-neutral expectation (Korean stock market)
n = 1	0.0041	−0.0069			6.44 × 10⁻⁴	0.0571***	0.0646
	(0.929)	(−0.648)			(0.081)	(2.742)	0.0646
	−0.0068	−0.0019	0.0127**	−0.0054	0.0075	0.0544**	0.0684
	(−1.072)	(−0.134)	(2.062)	(−0.493)	(0.816)	(2.268)	0.0684
n = 3	0.0078	0.0116			0.0126	0.0860***	0.0903
	(0.581)	(0.686)			(0.470)	(2.914)	0.0903
	−0.0170	0.0130	0.0291*	1.13 × 10⁻⁴	0.0284	0.0866**	0.1127
	(−0.947)	(0.524)	(1.809)	(0.006)	(0.962)	(2.548)	0.1127
n = 6	0.0202	0.0323			0.0323	0.0638	0.0593
	(0.841)	(0.968)			(0.673)	(1.159)	0.0593
	−0.0218	0.0215	0.0492*	0.0167	0.0589	0.0741	0.1013
	(−0.688)	(0.588)	(1.827)	(0.470)	(1.138)	(1.289)	0.1013
n = 12	0.0513	0.0537			0.0439	6.94 × 10⁻⁴	0.0229
	(1.394)	(0.987)			(0.595)	(0.008)	0.0229
	−0.0469	0.1075*	0.1153***	−0.0598	0.1064	−0.0307	0.0978
	(−0.814)	(1.859)	(2.955)	(−1.144)	(1.362)	(−0.327)	0.0978
Horizon	Const	D^Q_{U_E}	US_TP	US_TP × D^Q_{U_E}	US_RN	US_RN × D^Q_{U_E}	Adj. R²
Panel B: Term premium and risk-neutral expectation (US stock market)
n = 1	0.0045	−0.1398***			0.0015	0.1123***	0.0777
	(1.233)	(−2.793)			(0.455)	(2.873)	0.0777
	0.0051	−0.1073**	−0.0014	−0.0125	0.0020	0.0938***	0.0852
	(1.401)	(−2.386)	(−0.338)	(−1.491)	(0.556)	(2.675)	0.0852
n = 3	0.0070	−0.2372*			0.0040	0.2103**	0.0913
	(0.544)	(−1.802)			(0.407)	(2.064)	0.0913
	0.0137	−0.2141*	−0.0140	0.0015	0.0095	0.1886**	0.0964
	(1.203)	(−1.901)	(−1.105)	(0.094)	(0.889)	(2.134)	0.0964
n = 6	0.0066	−0.1859			0.0129	0.1940*	0.0661
	(0.257)	(−1.361)			(0.749)	(1.745)	0.0661
	0.0225	−0.1845	−0.0330	0.0258	0.0257	0.1719	0.0822
	(1.066)	(−1.292)	(−1.525)	(0.885)	(1.327)	(1.548)	0.0822
n = 12	−0.0146	−0.3081			0.0608	0.3136*	0.1590
	(−0.265)	(−1.496)			(1.565)	(1.906)	0.1590
	0.0104	−0.3670*	−0.0521	0.0663	0.0809*	0.3118*	0.1837
	(0.231)	(−1.697)	(−1.401)	(1.229)	(1.768)	(1.954)	0.1837

Horizon	Const	D^Q_{K_E}	KOR_TP	KOR_TP × D^Q_{K_E}	KOR_RN	KOR_RN × D^Q_{K_E}	Adj. R²
Panel A: Term premium and risk-neutral expectation (Korean stock market)
n = 1	0.0041	−0.0069			6.44 × 10⁻⁴	0.0571***	0.0646
	(0.929)	(−0.648)			(0.081)	(2.742)	0.0646
	−0.0068	−0.0019	0.0127**	−0.0054	0.0075	0.0544**	0.0684
	(−1.072)	(−0.134)	(2.062)	(−0.493)	(0.816)	(2.268)	0.0684
n = 3	0.0078	0.0116			0.0126	0.0860***	0.0903
	(0.581)	(0.686)			(0.470)	(2.914)	0.0903
	−0.0170	0.0130	0.0291*	1.13 × 10⁻⁴	0.0284	0.0866**	0.1127
	(−0.947)	(0.524)	(1.809)	(0.006)	(0.962)	(2.548)	0.1127
n = 6	0.0202	0.0323			0.0323	0.0638	0.0593
	(0.841)	(0.968)			(0.673)	(1.159)	0.0593
	−0.0218	0.0215	0.0492*	0.0167	0.0589	0.0741	0.1013
	(−0.688)	(0.588)	(1.827)	(0.470)	(1.138)	(1.289)	0.1013
n = 12	0.0513	0.0537			0.0439	6.94 × 10⁻⁴	0.0229
	(1.394)	(0.987)			(0.595)	(0.008)	0.0229
	−0.0469	0.1075*	0.1153***	−0.0598	0.1064	−0.0307	0.0978
	(−0.814)	(1.859)	(2.955)	(−1.144)	(1.362)	(−0.327)	0.0978
Horizon	Const	D^Q_{U_E}	US_TP	US_TP × D^Q_{U_E}	US_RN	US_RN × D^Q_{U_E}	Adj. R²
Panel B: Term premium and risk-neutral expectation (US stock market)
n = 1	0.0045	−0.1398***			0.0015	0.1123***	0.0777
	(1.233)	(−2.793)			(0.455)	(2.873)	0.0777
	0.0051	−0.1073**	−0.0014	−0.0125	0.0020	0.0938***	0.0852
	(1.401)	(−2.386)	(−0.338)	(−1.491)	(0.556)	(2.675)	0.0852
n = 3	0.0070	−0.2372*			0.0040	0.2103**	0.0913
	(0.544)	(−1.802)			(0.407)	(2.064)	0.0913
	0.0137	−0.2141*	−0.0140	0.0015	0.0095	0.1886**	0.0964
	(1.203)	(−1.901)	(−1.105)	(0.094)	(0.889)	(2.134)	0.0964
n = 6	0.0066	−0.1859			0.0129	0.1940*	0.0661
	(0.257)	(−1.361)			(0.749)	(1.745)	0.0661
	0.0225	−0.1845	−0.0330	0.0258	0.0257	0.1719	0.0822
	(1.066)	(−1.292)	(−1.525)	(0.885)	(1.327)	(1.548)	0.0822
n = 12	−0.0146	−0.3081			0.0608	0.3136*	0.1590
	(−0.265)	(−1.496)			(1.565)	(1.906)	0.1590
	0.0104	−0.3670*	−0.0521	0.0663	0.0809*	0.3118*	0.1837
	(0.231)	(−1.697)	(−1.401)	(1.229)	(1.768)	(1.954)	0.1837

Note: The table reports estimates from predictive regressions of growth in Korean and US stock market returns on term spread and its components with top 25% dummy variables of Korean and US EPUs, respectively. All variable definitions are identical to those in Table 3, except for D^Q_K_{_}_E and D^Q_U_{_}_E. D^Q_K_{_}_E(D^Q_U_{_}_E) is the dummy variable for Korean (US) top 25% high uncertainty periods. Horizon indicates predictive months of stock market returns. Panels A and B report the results of Korean and US stock markets, 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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