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

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  • Farag, Hisham
  • Cressy, Robert

Abstract

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.

Suggested Citation

  • Farag, Hisham & Cressy, Robert, 2011. "Do regulatory policies affect the flow of information in emerging markets?," Research in International Business and Finance, Elsevier, vol. 25(3), pages 238-254, September.
    • Handle: RePEc:eee:riibaf:v:25:y:2011:i:3:p:238-254
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    2. Seza Danışoğlu & Z. Nuray Güner, 2018. "Do price limits help control stock price volatility?," Annals of Operations Research, Springer, vol. 260(1), pages 129-157, January.

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