An Investigation of the Chinese Lunar New Year Effect in stock returns: the case of Hong Kong

Zhou, Yi (2007) An Investigation of the Chinese Lunar New Year Effect in stock returns: the case of Hong Kong. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

ABSTRACT

This study examines the pre-CLNY (Chinese Lunar New Year) effect in the pre-holiday returns of the Hang Seng index by using simplest generalized autoregressive conditional heteroskedasticty - GARCH (1, 1) model. The period investigated is from 2002 to 2007. This study reveals two major findings. First, by testing the returns on trading days preceding 11 Hong Kong public holidays, empirical results indicates that pre-holiday returns are significant higher than mean returns of any other trading days and therefore implying unusual returns patterns for Hang Seng index on trading days prior to holidays closing. The second results of this paper are consistent with prior research in that there is a strong pre-CLNY effect in many Asian stock markets especially in Hong Kong market. Strong evidence shows the highest mean returns can be achieved on two trading days immediately prior to Chinese Lunar New Year and this effect tend to be more persistent compared to other pre-holiday returns over the sample period in Hong Kong stock market. Three related explanations including cultural effect, positive holiday sentiment and bonus payment factor play important role in explaining the significant pre-CLNY effect. The current empirical findings benefit both big investment institutions and small individual stock traders. Hence, investors may able to improve their returns by taking better trading strategy and drawing more profitable decisions based on the presence of pre-CLNY effect in Hong Kong stock market. The investment suggestion recommended in the study suggests investors selling stocks out on two days prior to Chinese Lunar New Year as it generates the highest return. In other words, it is also the worst day to purchase stocks.

Item Type: Dissertation (University of Nottingham only)
Keywords: holiday effect
Depositing User: EP, Services
Date Deposited: 07 Mar 2008
Last Modified: 22 Oct 2016 11:55
URI: http://eprints.nottingham.ac.uk/id/eprint/21205

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