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Do government rescue policies reduce the market volatility after crash? Evidence from the Shanghai stock market

Ming-Yuan Yang, Sai-Ping Li, Yue Wu, Jingtai Tang and Fei Ren

Finance Research Letters, 2019, vol. 29, issue C, 117-124

Abstract: In this paper, we investigate the influence of government rescue policies on the Shanghai stock market after crashes by studying the dynamics of aftershocks based on the Omori law with high frequency minute data. We find that the rescue policies indeed reduce the index volatility when there are large fluctuations in the market. Empirical study of aftershocks for the decomposed components of the stock index further reveal the influence of government rescue policies. To our knowledge, this is the first study on government rescue policy influences based on the dynamics of aftershocks for decomposed components of the stock index.

Keywords: Aftershocks; Omori law; Crash; Government rescue policy (search for similar items in EconPapers)
JEL-codes: C61 G01 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:117-124