Market Efficiency of Commercial Bank in Financial Crisis
This study investigates commercial bank market efficiency in financial crisis. We employ a time-varying GARCH model because volatility matters in financial crisis. The empirical results show a significant positive relation between contemporaneous order imbalances and returns in convergence process...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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EconJournals
2016-04-01
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| Series: | International Journal of Economics and Financial Issues |
| Online Access: | http://mail.econjournals.com/index.php/ijefi/article/view/2036 |
| _version_ | 1797923740933160960 |
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| author | Han-Ching Huang Yong-Chern Su Tze-Yi Lin |
| author_facet | Han-Ching Huang Yong-Chern Su Tze-Yi Lin |
| author_sort | Han-Ching Huang |
| collection | DOAJ |
| description |
This study investigates commercial bank market efficiency in financial crisis. We employ a time-varying GARCH model because volatility matters in financial crisis. The empirical results show a significant positive relation between contemporaneous order imbalances and returns in convergence process toward efficiency. A direct linkage between volatility and order imbalances is examined by GARCH model. Surprisingly, a low connection exists between order imbalance and price volatility, implying that market makers are capable of mitigating commercial bank prices volatility in financial crisis. We develop an imbalance based trading strategy but fail to beat the market. A nested causality approach, which examines the dynamic return-order imbalance relationship during the price formation process, confirms the results.
Keywords: order imbalance; market efficiency; commercial bank; financial crisis.
JEL classification: G01; G14; G21
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| first_indexed | 2024-04-10T14:50:57Z |
| format | Article |
| id | doaj.art-2f3397391a20411ea0a33eba28d0a1e8 |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T14:50:57Z |
| publishDate | 2016-04-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-2f3397391a20411ea0a33eba28d0a1e82023-02-15T16:07:36ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382016-04-0162Market Efficiency of Commercial Bank in Financial CrisisHan-Ching Huang0Yong-Chern SuTze-Yi LinChung Yuan Christian University This study investigates commercial bank market efficiency in financial crisis. We employ a time-varying GARCH model because volatility matters in financial crisis. The empirical results show a significant positive relation between contemporaneous order imbalances and returns in convergence process toward efficiency. A direct linkage between volatility and order imbalances is examined by GARCH model. Surprisingly, a low connection exists between order imbalance and price volatility, implying that market makers are capable of mitigating commercial bank prices volatility in financial crisis. We develop an imbalance based trading strategy but fail to beat the market. A nested causality approach, which examines the dynamic return-order imbalance relationship during the price formation process, confirms the results. Keywords: order imbalance; market efficiency; commercial bank; financial crisis. JEL classification: G01; G14; G21 http://mail.econjournals.com/index.php/ijefi/article/view/2036 |
| spellingShingle | Han-Ching Huang Yong-Chern Su Tze-Yi Lin Market Efficiency of Commercial Bank in Financial Crisis International Journal of Economics and Financial Issues |
| title | Market Efficiency of Commercial Bank in Financial Crisis |
| title_full | Market Efficiency of Commercial Bank in Financial Crisis |
| title_fullStr | Market Efficiency of Commercial Bank in Financial Crisis |
| title_full_unstemmed | Market Efficiency of Commercial Bank in Financial Crisis |
| title_short | Market Efficiency of Commercial Bank in Financial Crisis |
| title_sort | market efficiency of commercial bank in financial crisis |
| url | http://mail.econjournals.com/index.php/ijefi/article/view/2036 |
| work_keys_str_mv | AT hanchinghuang marketefficiencyofcommercialbankinfinancialcrisis AT yongchernsu marketefficiencyofcommercialbankinfinancialcrisis AT tzeyilin marketefficiencyofcommercialbankinfinancialcrisis |