Market Risk in Demutualized Self-Listed Stock Exchanges: An International Analysis of Selected Time-Varying Betas

Andrew Worthington and Helen Higgs

Global Economic Review, 2006, vol. 35, issue 3, 239-257

Abstract: This article examines market risk in four demutualized and self-listed stock exchanges: the Australian Stock Exchange, the Deutsche Borse, the London Stock Exchange and the Singapore Stock Exchange. Daily company and the Morgan Stanley Capital International (MSCI) Index returns provide the respective asset and market portfolio data. A bivariate GARCH model is used to estimate time-varying betas for each exchange from listing until 7 June 2005. While the results indicate significant beta volatility, unit root tests show the betas to be mean-reverting. These findings are used to suggest that despite concerns that demutualized and self-listed exchanges entail new market risks that merit regulatory intervention, the betas of the exchange companies have not changed significantly since listing. However, market risk does vary considerable across the exchanges, with mean time-varying betas of 0.56 for the Deutsche Borse, 0.66 for the London Stock Exchange, 0.78 for the Singapore Stock Exchange, and 0.95 for the Australian Stock Exchange.

Keywords: Time-varying betas; moving average; bivariate GARCH; demutualization and self-listing; exchanges (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1080/12265080600887894

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