Recent data from the Korea Capital Market Institute shows that 28% of new investors accounted for the 20s and 26 percent for 30s last year. Also, it shows an increase in the size of credit loans for those in the 20s and 30s for the cryptocurrency investment frenzy. According to the ‘Credit loan status by age’ data by commercial banks, credit loans for the 20s have increased by 42.4% in December of the same year and by 28% for the 30s during the same period compared to January. In addition, ‘Every time’, a community of students for CBNU, has opened a board to share opinions about cryptocurrency, the 2030 generations in Korea and CBNU students are interested in investment. These CBT reporters interviewed Kim Ryu-mi, a CBNU professor in the college of business, to hear professional stories about the current investment situation and the professional story about investment.
Please introduce yourself and your major.
Hello, I’m Kim Ryu-mi, an assistant professor of Business Administration. Currently, I’m teaching investment theory, derivative theory, and financial management at CBNU, and I’m currently studying the anomalies in stock returns.
What is the most memorable study or lecture that you have ever had?
The most memorable study was the thesis ‘Contrarian profits of the Firm-specific Component on stock returns.’ In the thesis, I(We) found that there is a reversal phenomenon in the short term when observing the portion of the stock return that eliminated the expected return due to systematic factors. The reversal was also found by using the full stock yield. However, in the thesis, I(we) found that the performance of the contrarian strategy using the inherent rate of return is higher and longer-lasting than the contrarian profit using the total rate of return on shares. Personally, I remember it clearly because I put a lot of effort into it.
I wonder about the process of changing from a major in Environmental Studies in your Master’s course to majoring in Business Administration in Ph.D.
As a student, I chose natural sciences without hesitation. I have been very interested in earth science since school, so I naturally chose a major in Earth Environment related to a Science College.
Because I wanted to learn practical study, I went to engineering school for my master’s degree. I felt the need for Accounting in the process of writing a thesis, so I took business courses. Then, I became attracted to the subject and became a finance major. I have previously studied and proved the ‘absolute’ of nature and mathematics, I have been interested in mathematically proving and empirically revealing human behavior in the subject.
What is the most important thing in your major area, professor?
In business practice, understanding knowledge of macroeconomics is considerably important. In the study, knowledge of microeconomics is considerably important. Of course, mathematical knowledge is also needed along with knowledge of management and economy. However, it takes a lot of knowledge, not just one, as different views from diverse sides about a form of the market of the company are commonly important. Especially, as investment theory mostly treats stock, bond, and so on, it is mostly analyzed by using accounting and stock market data of business, macroeconomic indicators, and so on in the past. It is now recognized that human psychology can inflict on stock prices, stocks, and stock markets, so research is actively conducted on them. In this respect, it is difficult to select the most important thing. Yet, if I have to prioritize the most important thing, eventually it is important to possess both macroeconomic and microeconomic knowledge.
Currently, interest in investments like stock and Bitcoin is consistently spiking. What do you think about this situation, professor?
A lot of interest in the stock or particular financial products has been a periodic phenomenon. This situation is shown not only in Korea but in many other countries. However, the booms in the investment that has existed were always unsustainable. According to Aliber, Robert Z’s book, Manias, Panics and Crashes, these situations also existed in the 17th century and has occurred repeatedly. The book describes the process of limited supply driving up funds and price rising with ‘speculative madness.’ I feel that the description is exaggerated. After the fact, we can know that the conclusion about the current situation is connected to ‘panics’, ‘crashes’ by ‘speculative’ or interest in the stock market. However, in this repeated historical situation, we can learn the things that reduce the risk of our portfolio through diversified investment and enjoy benefits through long-term investment. These are the same things that are presented in textbooks. Once a palmy company has collapsed and become an old memory, the KOPI index rises. This situation means that diversified investment and long-term investment are less risky and have good results in terms of efficiency. To do diversified investment and long-term investment, investment in securities like stock, bonds from childhood is more advantageous. Korean people usually have a small percentage of investment in stocks in their twenties and thirties and have a big percentage of investment in stocks in middle ages, and later. In this case, it is not easy to enjoy the benefits of long-term investment. Also, they often do not have a diversified investment as they mostly think in terms of the short-term. I think it is desirable for young people in their 20s and 30s to continue this interest with investment when stocks are in the spotlight. However, do not modishly ‘sort out’ a single item or a single product and evaluate the enterprise aspect of the long-term. Therefore, I recommend that you create a diversified investment for yourself.
Additionally, I’m worried about students having an excessive interest in cryptocurrency regardless of profit. It is hard to analyze identify, value, and evaluate the risk of cryptocurrency. That implies that it is speculation, not investment. If many people’s interest in cryptocurrency turns out to be ‘speculative madness’, they should recognize that ‘panic’ and ‘collapse’ can occur, and it should be approached extremely carefully. We can know that cryptocurrency becomes a new alternative or speculative asset after the fact. Therefore, we should consider the size of the risk that one can handle.
What are your further research fields and final goal as a specialist in the field, professor?
Recently, I have interest in the stock market reaction according to the attention and behavior of investors. By a high proportion of individual investors, the Korean market is affected by individual investors. I research how the market reveals ineffectiveness according to each characteristic of individual investors targeting various events. Also, I’m very interested in global enterprise’s ESG (Environmental, Social and Governance) that is related to my previous major. However, most domestic researches are focus on ‘G.’ Therefore, I have a goal of knowing how ‘E’ can perform a role in the stock market. I feel great if my research is helpful to sustainable management. Ultimately, I want to be a researcher who can demonstrate the belief that a healthy financial industry distributes resources effectively.
Do you have a special message for CBNU students?
Like most students, I also have questions about my career, my strengths, and my weaknesses. For that reason, I spent a lot of time sharing career concerns with my friends. However, if I should choose a career, experience is key. Therefore, I attended various major classes, and consequently I majored in three areas. Also, at the same time, I got to know what I enjoy, and what I’m good at. Of course, I said based on my experience, if you know what you want in the future, I recommend getting experience directly or indirectly, even if an activity is restricted due to COVID-19. I think the best time to change myself is my 20s, namely, undergraduate student days. Of course, it is always possible to make changes later through various experiences, but it will probably be harder than now. Have various experiences. However, it would be even better if the experiences contribute to your development.