Nguyen, Trang, Chaiechi, Taha, Eagle, Lynne, and Low, David (2020) Growth enterprise market in Hong Kong: efficiency evolution and long memory in return and volatility. Journal of Asian Business and Economic Studies, 27 (1). pp. 19-34.

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Abstract

Purpose: Growth enterprise market (GEM) in Hong Kong is acknowledged as one of the world’s most successful examples of small and medium enterprise (SME) stock market. The purpose of this paper is to examine the evolving efficiency and dual long memory in the GEM. This paper also explores the joint impacts of thin trading, structural breaks and inflation on the dual long memory.

Design/methodology/approach: State-space GARCH-M model, Kalman filter estimation, factor-adjustment techniques and fractionally integrated models: ARFIMA–FIGARCH, ARFIMA–FIAPARCH and ARFIMA–HYGARCH are adopted for the empirical analysis.

Findings: The results indicate that the GEM is still weak-form inefficient but shows a tendency towards efficiency over time except during the global financial crisis. There also exists a stationary long-memory property in the market return and volatility; however, these long-memory properties weaken in magnitude and/or statistical significance when the joint impacts of the three aforementioned factors were taken into account.

Research limitations/implications: A forecasts of the hedging model that capture dual long memory could provide investors further insights into risk management of investments in the GEM.

Practical implications: The findings of this study are relevant to market authorities in improving the GEM market efficiency and investors in modelling hedging strategies for the GEM.

Originality/value: This study is the first to investigate the evolving efficiency and dual long memory in an SME stock market, and the joint impacts of thin trading, structural breaks and inflation on the dual long memory.

Item ID:	59181
Item Type:	Article (Research - C1)
ISSN:	2515-964X
Keywords:	Inflation; Structural breaks; Thin trading; Dual long memory; Evolution towards efficiency
Copyright Information:	© Trang Nguyen, Taha Chaiechi, Lynne Eagle and David Low. Published in Journal of Asian Business and Economic Studies. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode.
Date Deposited:	07 Aug 2019 23:35
FoR Codes:	38 ECONOMICS > 3802 Econometrics > 380205 Time-series analysis @ 100%
SEO Codes:	91 ECONOMIC FRAMEWORK > 9102 Microeconomics > 910206 Market-Based Mechanisms @ 100%
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