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TESTING THE NET BUYING PRESSURE HYPOTHESIS DURING THE ASIAN FINANCIAL CRISIS: EVIDENCE FROM HANG SENG INDEX OPTIONS
Author(s) -
Chan Kam C.,
Cheng Louis T. W.,
Lung Peter P.
Publication year - 2006
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2006.00165.x
Subject(s) - volatility (finance) , financial crisis , index (typography) , hang , economics , monetary economics , business , financial economics , keynesian economics , mechanical engineering , world wide web , computer science , engineering
We investigate net buying pressure in the Hong Kong Hang Seng Index options market during the Asian financial crisis from July 1997 to August 1998. Our findings suggest that during this period, the dramatic changes in volatility overwhelmed the dynamics of supply and demand in the options market. The extremely high realized volatility drove market participants' expectations about future market volatility in the early months of the crisis. Findings during the late‐crisis, pre‐crisis, and post‐crisis periods are consistent with the net buying pressure hypothesis.