PRE AND POST CHINESE NEW YEAR HOLIDAY EFFECTS: EVIDENCE FROM HONG KONG STOCK MARKET

Ricky Chia (), Shiok Ye Lim, Pui Khuan Ong and Siew Fong Teh
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Shiok Ye Lim: Labuan Faculty of International Finance, Universiti Malaysia Sabah, Malaysia
Pui Khuan Ong: Labuan Faculty of International Finance, Universiti Malaysia Sabah, Malaysia
Siew Fong Teh: Labuan Faculty of International Finance, Universiti Malaysia Sabah, Malaysia

The Singapore Economic Review (SER), 2015, vol. 60, issue 04, 1-14

Abstract: This paper investigated the existence of pre-Chinese New Year (CNY) and post-CNY holiday effect in the Hong Kong stock market for the period covering January 1988 to July 2012. The generalized autoregressive conditional heteroscedasticity (GARCH)-M model is adopted to examine the average returns and associated with symmetrical behavior. Then, asymmetric effect will be identified by using the Threshold GARCH-M (TGARCH-M) and Exponential GARCH-M (EGARCH-M) models. Results obtained indicate the significant two days pre-CNY and one day post-CNY holiday effects. Results also showed that post-CNY is found to be more volatile than the pre-CNY. Besides, the study found evidence of asymmetrical market reactions towards positive and negative news. The CNY holiday effects can be explained with the arguments drawn from behavioral finance, where the Chinese superstition and tradition cultures can alter investors' attitudes toward risk and affect investors' decision making in stock trading.

Keywords: Pre-holiday; post-holiday; symmetrical; asymmetrical behavior; G10 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1142/S021759081550023X

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