A new perspective on financial anomalies in emerging markets: the case of China
AbstractFinancial anomalies in emerging markets can be caused by very different reasons than that in mature markets. In a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model, we examine financial anomalies in emerging markets from a new perspective, which focuses on heavy political interventions. In the context of China, we show that political consideration of the government can be a critical force that drives the monthly anomaly in the stock market. The Chinese case indicates that usual explanations for the monthly anomaly or the January effect may become invalid in an environment where political intervention is a dominant force in the stock market. Typical of a policy-driven market that prevails in emerging economies, indicate no evidence for the January effect in China, neither its mirror version, the Chinese New Year effect. Rather, returns abnormality is found to occur in March when China is in the political high season. This March effect is likely a result of political manoeuvre by the government to make the appearance of a stable and thriving stock market, which serves the political purpose of preventing social resentment in a politically sensitive time. This shows political window dressing can be an important cause of financial anomalies, which has been largely neglected in the literature.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 18 (2008)
Issue (Month): 21 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAFE20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- de Bondt, Gabe & Peltonen, Tuomas A. & Santabárbara, Daniel, 2010.
"Booms and busts in China's stock market: Estimates based on fundamentals,"
Working Paper Series
1190, European Central Bank.
- Gabe de Bondt & Tuomas Peltonen & Daniel Santabarbara, 2011. "Booms and busts in China's stock market: estimates based on fundamentals," Applied Financial Economics, Taylor & Francis Journals, vol. 21(5), pages 287-300.
- Gabe J. de Bondt & Tuomas A. Peltonen & Daniel Santabárbara, 2010. "Booms and busts in China's stock market: Estimates based on fundamentals," Banco de Espaï¿½a Working Papers 1032, Banco de Espa�a.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.