Intervention stocks are the stocks that are held by national intervention agencies in the EU as a result of intervention buying of commodities that are subject to market price support. These commodities fall under the category of 'market support.' If the prices on the internal markets are higher than the intervention prices, intervention stocks may be sold on the internal market. They could also be offered for sale on the international market with the assistance of export restitutions.
The intervention of the Taiwanese government in the stock market sends encouraging signals, particularly during the holding period. After government intervention, one can observe a spillover effect as well as a change in the structural makeup.
The government of Hong Kong made a purchase of shares in each of the 33 companies that are included in the Hang Seng Index in August of 1998. We have discovered that the action taken by the government is responsible for reversing the downward trend of the stock market. The shareholders of stocks that are purchased by the government are the primary beneficiaries of the action taken by the government.
The value of the Hang Seng Index dropped from 16,673 on August 7, 1997 to 6,660 on August 13, 1998 in 1998. This decline began on August 7. The government of Hong Kong placed a large portion of the blame for the precipitous drop in the stock market on an increase in the number of speculators engaging in activities related to short selling. It is estimated that a total of HK$118 billion, which is equivalent to approximately $15 billion in American currency, was spent in order to purchase the shares of the 33 constituent stocks. Even during times of economic crisis, developed countries typically do not engage in direct stock market intervention in their respective stock markets. Midway through the year 1998, the government of Hong Kong was confronted with the very real possibility of a strike against her currency. Because of these factors, she ultimately decided to engage in the contentious practise of directly intervening in the stock market.
One of the earliest studies to investigate the effects of the Asian financial crisis and the intervention of the Hong Kong government was carried out by Cheng, Fung, and Chan (2000). Their research was published in 2000. Their findings suggest that government intervention not only causes a direct trading impact on the financial markets but also a fundamental change in the behaviour of investors. This is because their findings suggest that government intervention induces a direct trading impact on the financial markets. Even after taking into account the fact that Asian markets as a whole have been recovering, there is still a statistically significant and favourable impact that the Hong Kong government's intervention in the stock market has had on the behaviour of stock prices throughout the event period. The majority of our findings point unmistakably and unequivocally to the conclusion that the government is succeeding in its efforts to support and maintain the share prices of the 33 companies that comprise the HS.
It is possible to interpret the intervention of the Hong Kong government as the government caving in to the pressure brought on by the lobbying efforts of various special interest groups. Shareholders of stocks that are not directly supported by the government may still benefit indirectly from an action taken by the government if that action has a spillover effect. During the postintervention period, there are indications that their time-series behaviour underwent some kind of structural change.
A financial crisis that began in Thailand in 1997 and eventually spread to other Asian nations was triggered by the country's policy of managed float. By August 1998, the stock markets in these countries had experienced a decline in their market capitalization that was greater than fifty percent from where it had been before the crisis. The value of the Thai stock market dropped by 54 percent over the course of just one week, from the 28th of August to the 27th of September of that same year.
Kraus and Stoll (1972) observed an intraday price-pressure effect due to the sale of a large block of shares. The effect of government intervention in the stock market has a similar effect to that observed by Kraus and Stoll (1972), who observed the same effect. They discovered that by the end of the day, more than 70 percent of the observed price effect had disappeared.
Even after the end of the intervention period, the Hong Kong government has unquestionably contributed to the rise of the blue-chip stock HS. We begin our investigation into the potential spillover effect by looking at the return characteristics of various other Hong Kong stock indices. This will allow us to better understand the effect. A look at the differences and similarities in the distributional and time-series patterns of several different Hong Kong stocks.
According to the spillover effect hypothesis, the Hong Kong government directly intervenes in 33 different stocks, but this has an indirect impact on other parts of the market. We investigate the dynamic nature of the relationships that exist between the HS, the HSMC, and the HSCC because the intervention is known to result in a fundamental shift in the behaviour of the HS.
During the crash that occurred on the Chinese stock market in 2015, the Chinese government established a 'national team' to directly purchase stocks from more than 1000 different companies. Our research shows that the national team's interventions reduce the likelihood of a stock price crash for these companies, but they also increase the likelihood of stock price synchronicity and the cost of transactions.
The majority of share buybacks in Vietnam are done with the sole stated purpose of price stabilisation, and this is true for almost all of the buybacks. We document significantly higher abnormal returns during the pre-trading window for the buyback firms, which was driven by market reactions. Additionally, during the firm's actual transaction window, the firm experienced improved liquidity and reduced volatility.
Drawing from China and Russia's experiences during the global financial crisis, one can conclude that policy interventions during times of crisis have less of an impact when markets are integrated. According to our findings, interventions were successful in China but were not successful in Russia, which had more obvious global connections. The results of our research offer valuable policy lessons that can be used to mitigate the effects of the ongoing COVID-19 pandemic.
The volatility spillover from futures to spot markets is significant and more powerful than the reverse. Two parties are involved in the transmission of the downside risk, with the futures market taking the lead. The purpose of this paper is to investigate the efficacy of various market-restoration strategies that have been proposed in recent years in response to the collapse of the stock market.
We study the impact that government assistance has on the amount of risk that banks are willing to take by using data on bank applications to the Troubled Asset Relief Program (TARP). After receiving support from the government, the bailed-out banks start making riskier loans and shift their assets toward riskier securities. This shift in risk occurs primarily within the same asset class and is undetectable by regulatory capital ratios because it occurs within the same asset class.
We investigate whether or not the response of governments to the pandemic caused by the novel coronavirus COVID-19 can reduce the herding behaviour of investors in international stock markets. In the first three months of 2020, the daily stock market data from seventy-two different countries served as the basis for our empirical analysis. It would appear that the temporary restrictions on short selling that have been imposed by the European Union are having a moderating effect on herding.
The intervention carried out by the EU government was successful in reversing the downward trend that had been observed in the stock market. It should not come as a surprise to learn that shareholders of the 33 stocks that make up the NYSE were the ones who reaped the greatest benefits from the government's stock-buying programme, given that this programme involved only those stocks.
In the event of a short-term crisis on the stock market, stabilisation funds, also known as MSFs, are typically established. In this paper, we focus on the trading behaviour during the period following the financial crisis. We show that stocks that are held by MSFs have a significantly lower risk of experiencing a future crash compared to stocks that are not held.
Ashly Chole - Senior Finance & Technology Editor