A Regime-switching analysis of Asian bank stocks

Kin Yip Ho, Yanlin Shi, Zhaoyong Zhang

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Abstract

The market prices or returns of bank stocks contain important information for both supervisory bodies and market participants. In this chapter we examine the impact of firm-specific and macroeconomic news announcements on major Asian bank stock returns by applying a regime-switching framework. The analysis suggests that both the occurrence and sentiment of those news announcements have predictive power for future stock returns. Overall, firm-specific news has greater effects than macroeconomic news, and negative (positive) news can reduce (increase) stock returns. In addition, the magnitudes of those effects are different, depending on the types of news and regimes of stock returns. Our findings have great importance for policy makers seeking stability of financial system. Also, daily impact of news will help traders anticipate the potential effects on the returns of banks that they are monitoring.

Original languageEnglish
Title of host publicationHandbook of Asian Finance. Volume 1
Subtitle of host publicationFinancial markets and sovereign wealth funds
EditorsDavid Lee Kuo Chuen, Greg N. Gregoriou
Place of PublicationSan Diego, CA
PublisherElsevier
Chapter6
Pages105-129
Number of pages25
ISBN (Electronic)9780128011010
ISBN (Print)9780128009826
DOIs
Publication statusPublished - 4 Jun 2014
Externally publishedYes

Keywords

  • Asian bank stocks
  • Firm-specific news
  • Macroeconomic news
  • News sentiment
  • Regime-switching

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