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Market Risk in Demutualised Self-Listed Stock Exchanges: An International Analysis of Selected Time-Varying Betas

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Author Info
Andrew Worthington
Helen Higgs (School of Economics and Finance, Queensland University of Technology)
Abstract

This paper examines market risk in four demutualised and self-listed stock exchanges: the Australian Stock Exchange, the Deutsche Börse, the London Stock Exchange and the Singapore Stock Exchange. Daily company and MSCI index returns provide the respective asset and market portfolio data. A bivariate MA-GARCH model is used to estimate time-varying betas for each exchange from listing until 7 June 2005. While the results indicate significant beta volatility, unit root tests show the betas to be mean-reverting. These findings are used to suggest that despite concerns that demutualised and self-listed exchanges entail new market risks that merit regulatory intervention, the betas of the exchange companies have not changed significantly since listing. However, market risk does vary considerable across the exchanges, with mean time-varying betas of 0.56 for the Deutsche Börse, 0.66 for the London Stock Exchange, 0.78 for the Singapore Stock Exchange, and 0.95 for the Australian Stock Exchange. Key words: Accounting scandals, Enron, WorldCom, Event study, International Stock Markets.

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File URL: http://www.bus.qut.edu.au/faculty/schools/economics/documents/discussionPapers/2005/No%20201%20%20Worthington%20and%20Higgs%20Oct.pdf
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Publisher Info
Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 201.

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Date of creation: 15 Jun 2005
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Handle: RePEc:qut:dpaper:201

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Related research
Keywords: Time-varying betas; moving average; bivariate GARCH; demutualization and self-listing; exchanges;

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    Other versions:
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  8. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59. [Downloadable!] (restricted)
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  11. repec:cup:etheor:v:11:y:1995:i:1:p:122-50 is not listed on IDEAS
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  14. Huang, Bwo-Nung & Yang, Chin-Wei, 2000. "The Impact of Financial Liberalization on Stock Price Volatility in Emerging Markets," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 321-339, June. [Downloadable!] (restricted)
  15. Choudhry, Taufiq, 2002. "The Stochastic Structure of the Time-Varying Beta: Evidence from UK Companies," Manchester School, University of Manchester, vol. 70(6), pages 768-91, December. [Downloadable!] (restricted)
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