Taiwan's financial holding companies: an empirical investigation based on Markov regime-switching model
AbstractThough the Financial Holding Company Act in Taiwan permits banks, securities firms and insurance companies to affiliate, identifying the influence on Taiwan's financial holding companies hasn't been discussed rigorously yet. This paper presents a formal methodology, using two-state Markov regime switching approach, to allow for the uncertainty event-date of financial holding companies' stock return and risk. This study serves as one of the first studies that adopt a Markov regime-switching model to estimate financial holding companies' stock behaviour. The evidence shows that 12 of 13 financial holding companies have regime-switching and one has no regime-switching in Taiwan. Therefore, the stock behaviours of Taiwan's financial holding companies follow two regimes and the traditional linear model cannot be descriptive. However, the levels of 12 financial holding companies' risk are significantly low of state 1 and stock returns are indifferent between two states. Hence, there are diversification benefits of Taiwan's financial holding companies. Summarily, to assess the influence on Taiwan's financial holding companies, it is recognized that this methodology developed by the model is meaningful for research.
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 Economics.
Volume (Year): 37 (2005)
Issue (Month): 5 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Christopher M. Turner & Richard Startz & Charles R. Nelson, 1989.
"A Markov Model of Heteroskedasticity, Risk, and Learning in the Stock Market,"
NBER Working Papers
2818, National Bureau of Economic Research, Inc.
- Turner, Christopher M. & Startz, Richard & Nelson, Charles R., 1989. "A Markov model of heteroskedasticity, risk, and learning in the stock market," Journal of Financial Economics, Elsevier, vol. 25(1), pages 3-22, November.
- Perron, Pierre & Campbell, John Y, 1993. "A Note on Johansen's Cointegration Procedure When Trends Are Present," Empirical Economics, Springer, vol. 18(4), pages 777-89.
- Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
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.