Market volatility in the Korean stock market from 2004 to 2014 led to lower stock returns and liquidity. Stocks with more institutional trading were more affected by volatility shocks, especially those with foreign institutional trading. However, individual investors helped offset the negative impact of volatility on stock returns. Additionally, the interaction between market volatility and liquidity had a stronger effect on stock returns for stocks with more foreign institutional trading. The study also found evidence of different effects of market volatility on stock returns depending on whether trades were initiated by buyers or sellers.