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U.S. Quantitative Easing Policy Effect on TAIEX Futures Market Efficiency

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  • Han Ching Huang
  • Yong Chern Su
  • Wei-Shen Chen

Abstract

This paper examines the market efficiency of the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) Futures after the announcement of Quantitative Easing (QE) policy. Order imbalance is used to explore the relationship between return and order imbalance. We find that under the unconditional OLS model, lagged order imbalances almost have no significantly positive predictive power for current return. Nonetheless, on the trading day after the announcement of QE 1 policy, one-minute interval data show that the lagged order imbalance has predictive power for current return. Under the conditional OLS model, the reversed relation between current return and lagged order imbalance is not universal; on the other hand, after the announcement of QE 2 policy, the reversed relation between current return and lagged order imbalance is more common. Moreover, under volatility-GARCH (1, 1), one-minute interval data shows significantly positive relation between order imbalance and volatility.

Suggested Citation

  • Han Ching Huang & Yong Chern Su & Wei-Shen Chen, 2017. "U.S. Quantitative Easing Policy Effect on TAIEX Futures Market Efficiency," Applied Economics and Finance, Redfame publishing, vol. 4(4), pages 94-109, July.
    • Handle: RePEc:rfa:aefjnl:v:4:y:2017:i:4:p:94-109
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    References listed on IDEAS

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    4. Brennan, Michael J & Jegadeesh, Narasimhan & Swaminathan, Bhaskaran, 1993. "Investment Analysis and the Adjustment of Stock Prices to Common Information," The Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 799-824.
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    More about this item

    Keywords

    GARCH; order imbalance; quantitative easing;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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