ON THE RATE OF INFORMATION ABSORPTION IN THE CONDITIONAL VARIANCE OF SES DUAL LISTED STOCKS

Wai Mun Fong () and Pheng Lui Chng
Additional contact information
Wai Mun Fong: Department of Finance and Accounting, National University of Singapore, Kent Ridge Crescent, Singapore 119260, Singapore
Pheng Lui Chng: Department of Finance and Accounting, National University of Singapore, Kent Ridge Crescent, Singapore 119260, Singapore

International Journal of Theoretical and Applied Finance (IJTAF), 2000, vol. 03, issue 02, 205-217

Abstract: This paper uses daily returns on dual listed stocks traded on the Stock Exchange of Singapore (SES) to test the information-based hypothesis proposed by Longin [16]. The hypothesis is that the rate of information absorption in the conditional variance is faster for foreign shares (open to foreigners and locals) than for local shares (open to locals only). We test this hypothesis using a bivariate GARCH(1,1) model for 9 dual listed stocks over the period 1991–1996. The evidence indicates that the rate of information absorption is consistent with Longin's conjecture that the rate of information absorption varies inversely with the number of informed traders. The results also support previous U.S. evidence by Conrad, Gultekin and Kaul [7]. Our study suggests that in markets with foreign ownership restrictions, removing those restrictions is likely to improve both market efficiency and liquidity.

Date: 2000
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024900000103
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:03:y:2000:i:02:n:s0219024900000103

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024900000103

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().