Free Float and Market Liquidity: A Study of Hong Kong Government Intervention

Posted: 8 Mar 2004

See all articles by Kalok Chan

Kalok Chan

CUHK Business School

Yue-Cheong Chan

Hong Kong Polytechnic University - School of Accounting and Finance

Wai Ming Fong

The Chinese University of Hong Kong (CUHK) - Department of Finance

Abstract

The August 1998 Hong Kong government intervention in the stock market offers a natural experiment for studying the relation between a free float and market liquidity, where a free float is the portion of listed share capital that is freely traded on the market. Our findings show that, relative to a group of control stocks, there was an increase in the price effects of trades for the 33 Hang Seng Index component stocks that were bought by the government. On the other hand, there was no clear cross-sectional relation between the change in the price effect and the magnitude of government holdings or the decrease in the free float.

JEL Classification: G14

Suggested Citation

Chan, Kalok and Chan, Yue-Cheong and Fong, Wai Ming, Free Float and Market Liquidity: A Study of Hong Kong Government Intervention. Journal of Financial Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=433680

Kalok Chan

CUHK Business School ( email )

Hong Kong
852 3943 9988 (Phone)

Yue-Cheong Chan (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

School of Accounting and Finance
Hong Kong Polytechnic University
Hung Hom, Kowloon
Hong Kong
852-2766-7118 (Phone)
852-2356-9550 (Fax)

Wai Ming Fong

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong

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