Modelling Regulatory Change V's Volume, of Trading Effects in HSIF and HSI Volatility

Gerard Gannon () and Siu Pang Au-Yeung ()
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Gerard Gannon: Department of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, Burwood Highway, Burwood, Victoria 3125, Australia
Siu Pang Au-Yeung: Corporate, Investment Banking and Markets, The Hong Kong and Shanghai Banking Corporation, Level 19, 1 Queen's Road, Central, Hong Kong

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2008, vol. 11, issue 01, 47-59

Abstract: In an earlier paper, we adopted a bi-variate BEKK–GARCH framework and employed a systematic approach to examine structural breaks in the Hang Seng Index and Index Futures market volatility. Switching dummy variables were included and tested in the variance equations to check for any structural changes in the autoregressive volatility structure due to the events that have taken place in the Hong Kong market surrounding the Asian markets crisis. In this paper, we include measures of daily trading volume from both markets in the estimation. Likelihood ratio tests indicate the switching dummy variables become insignificant and the GARCH effects diminish but remain significant. There is some evidence that the Sequential Arrival of Information Model (SIM) provides a platform to explain these market induced effects when volume of trade is accounted for.

Keywords: Regulatory change; multivariate volatility; volume of trade; JEL Classification: G14 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1142/S0219091508001258

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