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The Impact of Non-trading Periods on the Measurement of Volatility

Listed author(s):
  • Yaw-Huei Wang


    (Department of Finance at the National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei 10716, Taiwan)

  • Yu-Jen Hsiao


    (Department of Finance at National Central University, No. 300, Jhongda Road, Jhongli City, Taoyuan County 32001, Taiwan)

Registered author(s):

    Based upon the theory of the "arrival of news", the main purpose of this paper is to investigate the impact of non-trading periods on the measurement of volatility for the S&P 500, FTSE 100, and TAIEX indices. Using an adaptation of the GJR (1,1) model, we find that both weekday holiday periods and half-day trading periods have significant impacts on the estimation of volatility for the S&P 500 and FTSE 100 indices. On the other hand, weekends have significant impacts for the TAIEX index. Our findings imply that for the UK and US markets, much less relevant information is produced during weekends, while more relevant information continues to be produced during other types of non-trading periods. However, the weekend volatility of the Taiwan market is specially driven because the US macro news is announced on Fridays and the trading time of the US market is later than that of the Taiwan market without any overlapping.

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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): 13 (2010)
    Issue (Month): 04 ()
    Pages: 607-620

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    Handle: RePEc:wsi:rpbfmp:v:13:y:2010:i:04:p:607-620
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