Portfolio Effect on Daily Stock Return Across Industrial Sectors in Hong Kong: An Analysis of Dow Effect

Gordon Y. N. Tang
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Gordon Y. N. Tang: Department of Finance and Decision Sciences, Hong Kong Baptist University, Kowloon Tong, Kowloon, HONG KONG, P.R.China

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 1999, vol. 02, issue 01, 1-28

Abstract: This paper examines the portfolio effect on the daily stock returns across industrial sectors in the Hong Kong market. For the overall daily stock returns, our results show that with an increase in the portfolio size, the standard-deviation and kurtosis decrease while the skewness becomes more negative. The result is a more negatively skewed but less leptokurtic stock return distribution on average. However, the impact of diversification on stock returns differs across weekdays. On Monday, the reduction in standard deviation is the smallest across all weekdays. Simple portfolio diversification cannot eliminate skewness and kurtosis only on Monday but not on other weekdays. Our results suggest that a new anomaly exists in the Hong Kong stock market on Monday.

JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 1999
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DOI: 10.1142/S0219091599000023

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