The long-term effects of section transfers on return volatility: Intraday and overnight periods

Abstract

Purpose Studies on transfers to a more regulated section show an increase in information disclosure and stocks’ liquidity levels. Classical theories suggest that volatility should also be reduced. This study aims to analyse the long-term effects of a section transfer to a more regulated section (TSE 1/TSE 2) on stock return volatility. Design/methodology/approach This study uses an empirical framework relying on two-sample t-tests and panel regressions. These use robust standard errors and control for fixed effects, day effects and macroeconomic factors. The return variance of comparable stocks’ benchmark sample, instead of market variance, is used as a control variable. Comparable stocks operate within the same industry and do not transfer during the sample period. The authors test our results’ robustness using generalized autoregressive conditional heteroskedasticity estimates. Findings The study’s main findings show that pre-transferred stocks are more volatile than the stocks’ benchmark sample. The transfer to a more regulated section leads to a gradual decrease in the total daily stock return volatility, intraday return volatility and overnight return volatility. Originality/value To the best of my knowledge, this study is the first to empirically address the volatility change caused by the stocks’ transfer to a more regulated section. This study highlights the benefits of choosing section transfers to reduce volatility.

The value premium in the Vietnamese equity market

“…Since this paper concentrates on the Vietnamese stock market, only firms published in the HNX and the HOSE are considered (Le and Nguyen, 2022;Kim, 2022). A monthly data interval is chosen because using daily or weekly intervals might lead to a non-trading bias (Abo, 2022). The non-trading bias arises because the returns in non-trading periods are zero, although the market may move up or down significantly in those periods.…”