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Do government rescue policies reduce the market volatility after crash? Evidence from the Shanghai stock market

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  • Yang, Ming-Yuan
  • Li, Sai-Ping
  • Wu, Yue
  • Tang, Jingtai
  • Ren, Fei

Abstract

In this paper, we investigate the influence of government rescue policies on the Shanghai stock market after crashes by studying the dynamics of aftershocks based on the Omori law with high frequency minute data. We find that the rescue policies indeed reduce the index volatility when there are large fluctuations in the market. Empirical study of aftershocks for the decomposed components of the stock index further reveal the influence of government rescue policies. To our knowledge, this is the first study on government rescue policy influences based on the dynamics of aftershocks for decomposed components of the stock index.

Suggested Citation

  • Yang, Ming-Yuan & Li, Sai-Ping & Wu, Yue & Tang, Jingtai & Ren, Fei, 2019. "Do government rescue policies reduce the market volatility after crash? Evidence from the Shanghai stock market," Finance Research Letters, Elsevier, vol. 29(C), pages 117-124.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:117-124
    DOI: 10.1016/j.frl.2019.03.020
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    2. Saiful Izzuan Hussain & Steven Li, 2022. "Dependence structure between oil and other commodity futures in China based on extreme value theory and copulas," The World Economy, Wiley Blackwell, vol. 45(1), pages 317-335, January.

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    More about this item

    Keywords

    Aftershocks; Omori law; Crash; Government rescue policy;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G01 - Financial Economics - - General - - - Financial Crises

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