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Modelling Regulatory Change V's Volume, of Trading Effects in HSIF and HSI Volatility

Listed author(s):
  • Gerard Gannon


    (Department of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, Burwood Highway, Burwood, Victoria 3125, Australia)

  • Siu Pang Au-Yeung


    (Corporate, Investment Banking and Markets, The Hong Kong and Shanghai Banking Corporation, Level 19, 1 Queen's Road, Central, Hong Kong)

Registered author(s):

    In an earlier paper, we adopted a bi-variate BEKK–GARCH framework and employed a systematic approach to examine structural breaks in the Hang Seng Index and Index Futures market volatility. Switching dummy variables were included and tested in the variance equations to check for any structural changes in the autoregressive volatility structure due to the events that have taken place in the Hong Kong market surrounding the Asian markets crisis. In this paper, we include measures of daily trading volume from both markets in the estimation. Likelihood ratio tests indicate the switching dummy variables become insignificant and the GARCH effects diminish but remain significant. There is some evidence that the Sequential Arrival of Information Model (SIM) provides a platform to explain these market induced effects when volume of trade is accounted for.

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    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 11 (2008)
    Issue (Month): 01 ()
    Pages: 47-59

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    Handle: RePEc:wsi:rpbfmp:v:11:y:2008:i:01:p:47-59
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