Do regulatory policies affect the flow of information in emerging markets?

In a previous paper we established that volatility is best explained by contemporaneous rather than lagged trading volume in the Egyptian stock exchange (EGX). The main objective of this paper is to investigate the effects of regulatory policies - namely the switch from price limit to circuit breake...

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Bibliographic Details
Published in:Research in international business and finance 2011-09, Vol.25 (3), p.238-254
Main Authors: Farag, Hisham, Cressy, Robert Clive
Format: Article
Language:English
Subjects:
Volatility Trading volume Trading halt Price limit
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Summary:In a previous paper we established that volatility is best explained by contemporaneous rather than lagged trading volume in the Egyptian stock exchange (EGX). The main objective of this paper is to investigate the effects of regulatory policies - namely the switch from price limit to circuit breaker - on the dynamic relationship between trading volume and stock returns volatility in the EGX. Using daily returns data for 20 actively traded companies as well as the EGX30 market index, the Generalised Method of Moments (GMM), results show that the volume-volatility relationship is not only endogenous but is also structurally altered by the switch.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2010.11.001