Stock index reaction to large price changes: Evidence from major Asian stock indexes

Mazouz, Khelifa ORCID: https://orcid.org/0000-0001-6711-1715, Joseph, Nathan Lael and Palliere, Clement 2009. Stock index reaction to large price changes: Evidence from major Asian stock indexes. Pacific-Basin Finance Journal 17 (4) , pp. 444-459. 10.1016/j.pacfin.2008.11.001

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Abstract

We examine the short-term price behavior of ten Asian stock market indexes following large price changes or “shocks”. Under the standard OLS regression, there is stronger support for return continuations particularly following positive and negative price shocks of less than 10% in absolute size. The results under the GJR-GARCH method provide stronger support for market efficiency, especially for large price shocks. For example, for the Hong Kong stock index, negative shocks of less than − 5% but more than − 10% generate a significant one day cumulative abnormal return (CAR) of − 0.754% under the OLS method, but an insignificant CAR of 0.022% under the GJR-GARCH. We find no support for the uncertainty information hypothesis. Furthermore, the CARs following the period after the Asian financial crisis adjust more quickly to price shocks.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HG Finance
Uncontrolled Keywords:	Market efficiency; Overreaction; Return continuations; Uncertainty information hypothesis; Heteroscedasticity
Publisher:	Elsevier
ISSN:	0927-538X
Last Modified:	25 Oct 2022 08:58
URI:	https://orca.cardiff.ac.uk/id/eprint/56682

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