Korea Capital Market Institute

Amid Korea’s recent stock market rally, small and mid-cap stock returns seem relatively low in the short run. However, annual corporate earnings of listed companies suggest that mid and large-cap stock returns are at a lower ebb rather than those of small and mid-cap stocks, which appears to highly relate to the trading behavior of institutional investors including foreigners. Also found is that the stock market rally despite the slump in mid and large-cap stocks over the past year has stemmed from an abrupt surge in some mega-cap stocks that hold the great weight in the KOSPI. The growing clout of few mega-cap stocks and institutional investors’ trading behavior is expected to create spillover effects in various aspects, which requires a thorough observation and analysis.