Impact of Ting Hai Effects on Hang Seng Index Empirical Studies Based Univariate ARMA-GARCH Process

Abstract

This paper examines the effectiveness of Ting Hai’s effect -- the well-known market anomaly in Hong Kong. It uses the simple OLS regression and E-GARCH to test the impact of this anomaly on the HSI return and volatility. The result finds that Ting Hai’s effect has no significant impact on the HSI return but has significant impact on the volatility. In addition, this paper explains the most possible cause of the Ting Hai’s effect by investors’ behavior -- self-fulfilling prophecy.