Capital Flows and Stock Price Volatility: Evidence from Hong Kong  

Oleh:

Hung, Bill W. S. ; Tong, Christopher S. P.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: Asia Pacific Journal of Management vol. 11 no. 2 (Okt. 1994), page 225-235.
Fulltext: Bill W. S. Hung.pdf (26.65KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: AA66 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

The short-run dynamics and the long-run comovement of stock prices, capital flows, and the real interest rates are investigated for the case of Hong Kong. Hong Kong has been experiencing massive capital flows since 1984. This is largely due to the implementation of the linked exchange rate system, which has greatly reduced the risk of capital loss due to exchange rate fluctuations. The analysis applies the vector cointegration test and vector error-correction model to investigate this dynamic interrelation. The Johansen cointegration test results suggest that there are 2 cointegrating vectors among the variables. These results lead to the conclusion that stock prices, capital flows, and the real interest rates are moving together in Hong Kong in the long run. This long-run relationship implies that the stock market is efficient even in the short run. The results also indicate that the arbitrage theory is good in explaining the level of capital flows in Hong Kong.

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