The Korean Spotlight: The Effect of Culture on Stock Returns Through Investor Attention*

Abstract

This study empirically examines the relationship between “investor attention” and aggregate stock returns, seeking to determine whether interest in South Korea can predict the returns of the Korean stock market. The results confirm a positive relationship between interest in Korea and future stock market returns. Furthermore, this relationship is observed to have emerged with the widespread dissemination of Korean culture starting in 2017. This impact is found to be more significant on the KOSDAQ market compared to the KOSPI market. Within the KOSPI market, the influence of interest on stock returns is particularly pronounced in the case of small-cap stocks. It is also observed that since 2017, as interest in South Korea has increased, information related to the improvement of Korea's corruption index has begun to significantly affect stock returns.