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

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

No 2013-30, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

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: Tourism; Firm size; Stock returns; Conditional volatility models; Volatility size effects; Asymmetry; Tourism policy reform. (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013, Revised 2013-08
Note: For financial support, the first author is most grateful to the National Science Council, Taiwan, and the third author wishes to acknowledge the Australian Research Council and the National Science Council, Taiwan.
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Related works:
Journal Article: The impact of China on stock returns and volatility in the Taiwan tourism industry (2014)
Working Paper: The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry (2013)
Working Paper: The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry (2013)
Working Paper: The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry (2013)
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