Impact of IPO Activities on the Hong Kong Dollar Interbank Market
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.
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