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Free Float And Market Liquidity: A Study Of Hong Kong Government Intervention

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  • Kalok Chan
  • Yue‐Cheong Chan
  • Wai‐Ming Fong

Abstract

The August 1998 Hong Kong government intervention in the stock market offers a natural experiment for studying the relation between a free float and market liquidity, where a free float is the portion of listed share capital that is freely traded on the market. Our findings show that, relative to a group of control stocks, there was an increase in the price effects of trades for the 33 Hang Seng Index component stocks that were bought by the government. On the other hand, there was no clear cross‐sectional relation between the change in the price effect and the magnitude of government holdings or the decrease in the free float.

Suggested Citation

  • Kalok Chan & Yue‐Cheong Chan & Wai‐Ming Fong, 2004. "Free Float And Market Liquidity: A Study Of Hong Kong Government Intervention," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 27(2), pages 179-197, June.
    • Handle: RePEc:bla:jfnres:v:27:y:2004:i:2:p:179-197
    DOI: 10.1111/j.1475-6803.2004.t01-1-00078.x
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    Cited by:

    1. Zhu, Minchen & Lv, Dayong & Wu, Wenfeng, 2022. "Market stabilization fund and stock price crash risk: Evidence from the post-crash period," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    2. Schouten, Michael C., 2009. "The Case for Mandatory Ownership Disclosure," MPRA Paper 14139, University Library of Munich, Germany, revised 13 Mar 2009.
    3. Akber, Ushna & Muhammad, Nabeel, 2013. "Is Pakistan Stock Market moving towards Weak-form efficiency? Evidence from the Karachi Stock Exchange and the Random Walk Nature of free-float of shares of KSE 30 Index," MPRA Paper 49128, University Library of Munich, Germany.
    4. Li, Hui & Liu, Kerry, 2024. "China's National Team: A Game Changer in Stock Market Stabilization?," Finance Research Letters, Elsevier, vol. 61(C).
    5. Weill, Pierre-Olivier, 2008. "Liquidity premia in dynamic bargaining markets," Journal of Economic Theory, Elsevier, vol. 140(1), pages 66-96, May.
    6. Xiumei Liu & Fangbo Si & Chenxin Xie & Lu Xie, 2024. "Minority state ownership and firm performance: Evidence from the Chinese stock market crash in 2015," Financial Management, Financial Management Association International, vol. 53(2), pages 291-325, June.
    7. Ding, Xiaoya (Sara) & Ni, Yang & Zhong, Ligang, 2016. "Free float and market liquidity around the world," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 236-257.
    8. Ushna Akber & Nabeel Muhammad, 2014. "Is Pakistan Stock Market Moving towards Weak-Form Efficiency? Evidence from The Karachi Stock Exchange and the Random Walk Nature of Free-Float of Shares of KSE 30 Index," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(6), pages 808-836, June.
    9. Schouten, Michael C., 2009. "The Case for Mandatory Ownership Disclosure," MPRA Paper 12800, University Library of Munich, Germany.

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