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Impact of IPO Activities on the Hong Kong Dollar Interbank Market

Author

Listed:
  • Frank Leung

    (Research Department, Hong Kong Monetary Authority)

  • Philip Ng

    (Research Department, Hong Kong Monetary Authority)

Abstract

Hong Kong has witnessed an equity initial public offering (IPO) boom since 2005. As the interbank payments involved in an IPO can be hundreds of times larger than the Aggregate Balance, increased funding needs and heightened demand for interbank liquidity may drive interbank interest rates up. Empirical estimates from error-correction models and GARCH models for HIBORs show that funding needs on the closing date of an IPO increase the level and conditional volatility of the overnight and one-week HIBORs (but not those of the one-month and longer-term HIBORs). On the other hand, estimated models for HIBORs with different maturities do not detect any statistically significant effect of the IPO variable on the refund date of an IPO.

Suggested Citation

  • Frank Leung & Philip Ng, 2008. "Impact of IPO Activities on the Hong Kong Dollar Interbank Market," Working Papers 0811, Hong Kong Monetary Authority.
  • Handle: RePEc:hkg:wpaper:0811
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    File URL: http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP08_11_full.pdf
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    Cited by:

    1. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.
    2. Dong He & Zhiwei Zhang & Honglin Wang, 2009. "Hong Kong's Financial Market Interactions with the US and Mainland China in Crisis and Tranquil Times," Working Papers 0910, Hong Kong Monetary Authority.

    More about this item

    Keywords

    IPO; interbank liquidity; interest rate volatility; event studies;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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