U.S. Quantitative Easing Policy Effect on TAIEX Futures Market Efficiency

Han Ching Huang, Yong Chern Su and Wei-Shen Chen

Applied Economics and Finance, 2017, vol. 4, issue 4, 94-109

Abstract: This paper examines the market efficiency of the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) Futures after the announcement of Quantitative Easing (QE) policy. Order imbalance is used to explore the relationship between return and order imbalance. We find that under the unconditional OLS model, lagged order imbalances almost have no significantly positive predictive power for current return. Nonetheless, on the trading day after the announcement of QE 1 policy, one-minute interval data show that the lagged order imbalance has predictive power for current return. Under the conditional OLS model, the reversed relation between current return and lagged order imbalance is not universal; on the other hand, after the announcement of QE 2 policy, the reversed relation between current return and lagged order imbalance is more common. Moreover, under volatility-GARCH (1, 1), one-minute interval data shows significantly positive relation between order imbalance and volatility.

Keywords: GARCH; order imbalance; quantitative easing (search for similar items in EconPapers)
Date: 2017
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