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Modelling Regulatory Change V's Volume of Trade Effects in HSIF and HSI Volatility: A Note

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 provides a platform to explain these market induced effects when volume of trade is accounted for.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2007_06aef.pdf
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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Accounting, Finance, Financial Planning and Insurance Series with number 2007_06.

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Length: 18 pages
Date of creation: 21 Apr 2007
Date of revision:
Handle: RePEc:dkn:acctwp:aef_2007_06
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