In October 1996, The Dhaka Stock Exchange （DSE） adopted trading halts for individual stocks, collectively known as ＂circuit breakers＂, to reduce the stock market volatility. This paper reviews the existing circuit...In October 1996, The Dhaka Stock Exchange （DSE） adopted trading halts for individual stocks, collectively known as ＂circuit breakers＂, to reduce the stock market volatility. This paper reviews the existing circuit breakers literature and developed five hypothesis--＂Magnet Effect＂, ＂Cool off-Heating （C-H） Effect＂, ＂Information Hypothesis＂, ＂Volatility Spillover Hypothesis＂ and ＂Trading Interferences Hypothesis＂--which could be tested empirically not only in the Dhaka Stock Exchange but any stock exchanges around the world. This paper also suggests most appropriate econometric models for empirical testing. GARCH for inter day data and Event Study methodology for intra day data. Moreover, to test the robustness non-parametric tests need to use along with parametric one. Considering the stock market bubbles in 1996, it has been found that it was optimal for the regulators to adopt this trading halt, but not for the market. It failed to protect the market. However, this might be the consequences of misconceptions about the purpose and effectiveness of circuit breakers. Despite many arguments contrary to this mechanism and absence of any conclusive empirical evidence for a fragile stock exchange like DSE, it may be useful sometimes to replace the ＂invisible hand of the marketplace＂ with the ＂visible hand of the market regulators＂.展开更多
This study investigates the relationship between trading volume and returns in SET50 index Futures market in the period from April 2006 to December 2008 using 653 observations. From previous studies, we include three ...This study investigates the relationship between trading volume and returns in SET50 index Futures market in the period from April 2006 to December 2008 using 653 observations. From previous studies, we include three methodologies namely the GARCH model, the Generalized Method of Moments （GMM） to estimate systems of equations and the Granger causality test to investigate the relationship more thoroughly. In addition, we introduce the lagged volume as a new explanatory variable in the GARCH model. Overall, the results show the significant contemporaneous and dynamic relationships between trading volume and returns volatility which support the sequential information arrival hypothesis and imply some degree of market inefficiency. The results from this study also show that past information of trading volume can be used to improve the prediction of price volatility. Therefore, regulators and traders could include past information of trading volume of SET50 index futures in tracking and monitoring the market volatility level and the investment risk in order to make a timely decision.展开更多
文摘In October 1996, The Dhaka Stock Exchange （DSE） adopted trading halts for individual stocks, collectively known as ＂circuit breakers＂, to reduce the stock market volatility. This paper reviews the existing circuit breakers literature and developed five hypothesis--＂Magnet Effect＂, ＂Cool off-Heating （C-H） Effect＂, ＂Information Hypothesis＂, ＂Volatility Spillover Hypothesis＂ and ＂Trading Interferences Hypothesis＂--which could be tested empirically not only in the Dhaka Stock Exchange but any stock exchanges around the world. This paper also suggests most appropriate econometric models for empirical testing. GARCH for inter day data and Event Study methodology for intra day data. Moreover, to test the robustness non-parametric tests need to use along with parametric one. Considering the stock market bubbles in 1996, it has been found that it was optimal for the regulators to adopt this trading halt, but not for the market. It failed to protect the market. However, this might be the consequences of misconceptions about the purpose and effectiveness of circuit breakers. Despite many arguments contrary to this mechanism and absence of any conclusive empirical evidence for a fragile stock exchange like DSE, it may be useful sometimes to replace the ＂invisible hand of the marketplace＂ with the ＂visible hand of the market regulators＂.
文摘This study investigates the relationship between trading volume and returns in SET50 index Futures market in the period from April 2006 to December 2008 using 653 observations. From previous studies, we include three methodologies namely the GARCH model, the Generalized Method of Moments （GMM） to estimate systems of equations and the Granger causality test to investigate the relationship more thoroughly. In addition, we introduce the lagged volume as a new explanatory variable in the GARCH model. Overall, the results show the significant contemporaneous and dynamic relationships between trading volume and returns volatility which support the sequential information arrival hypothesis and imply some degree of market inefficiency. The results from this study also show that past information of trading volume can be used to improve the prediction of price volatility. Therefore, regulators and traders could include past information of trading volume of SET50 index futures in tracking and monitoring the market volatility level and the investment risk in order to make a timely decision.
