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The impact of settlement time on the volatility of stock markets

Dong Li (), Shao-King Lin and Chulin Li

Applied Financial Economics, 1997, vol. 7, issue 6, 689-694

Abstract: In this paper we investigate the impact of the switching from the same-day settlement to the following-day settlement on the market volatility and its structure. Using the Levene tests and bootstrap procedures, we find that the switching causes a drastic decrease in the stock market volatility. In addition, using a modified GARCH model, we also find a substantial change in the volatility structure, which implies that the markets become less efficient after the switching since the volatility shocks are less quickly assimilated in the stock markets.

Date: 1997
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DOI: 10.1080/758533861

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Handle: RePEc:taf:apfiec:v:7:y:1997:i:6:p:689-694