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The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry

Chia-Lin Chang, Hui-Kuang Hsu and Michael McAleer

No EI 2013-26, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: This paper investigates the stock returns and volatility size effects for firm performance in the Taiwan tourism industry, especially the impacts arising from the tourism policy reform that allowed mainland Chinese tourists to travel to Taiwan. Four conditional univariate GARCH models are used to estimate the volatility in the stock indexes for large and small firms in Taiwan. Daily data from 30 November 2001 to 27 February 2013 are used, which covers the period of Cross-Straits tension between China and Taiwan. The full sample period is divided into two subsamples, namely prior to and after the policy reform that encouraged Chinese tourists to Taiwan. The empirical findings confirm that there have been important changes in the volatility size effects for firm performance, regardless of firm size and estimation period. Furthermore, the risk premium reveals insignificant estimates in both time periods, while asymmetric effects are found to exist only for large firms after the policy reform. The empirical findings should be useful for financial managers and policy analysts as it provides insight into the magnitude of the volatility size effects for firm performance, how it can vary with firm size, the impacts arising from the industry policy reform, and how firm size is related to financial risk management strategy.

Keywords: asymmetry; conditional volatility models; firm size; stock returns; tourism; tourism policy reforms; volatility size effects (search for similar items in EconPapers)
JEL-codes: C22 G18 G22 G32 L83 (search for similar items in EconPapers)
Date: 2013-08-01
New Economics Papers: this item is included in nep-bec, nep-cse, nep-fmk and nep-tur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The impact of China on stock returns and volatility in the Taiwan tourism industry (2014) Downloads
Working Paper: The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry (2013) Downloads
Working Paper: The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry (2013) Downloads
Working Paper: The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry (2013) Downloads
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