Anatomy of a Government Intervention in Index Stocks: Price Pressure or Information Effects?
AbstractIn a massive intervention designed to deter speculators, the Hong Kong Monetary Authority (HKMA) bought Hang Seng index stocks in August 1998. These stocks experienced a 24% abnormal return during the intervention period. The abnormal returns are not reversed over the next eight weeks, refuting the hypothesis that returns are due to temporary liquidity effects. Cross-sectional analysis of daily abnormal returns during the intervention period reveals that these returns are related to overall intervention activity rather than stock-specific intervention. This evidence is consistent with information effects rather than price pressure effects.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 79 (2006)
Issue (Month): 2 (March)
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