Title: Examining equity security investors' multi-asymmetric price adjustment behaviours via threshold models: an empirical study on four developed and three emerging Asian stock markets

Authors: Ming-Yuan Leon Li, Hsiou-Wei William Lin

Addresses: Graduate Institute of Finance and Banking, National Cheng Kung University, No.1, Ta-Hsueh Road, Tainan 701, Taiwan. ' Department of International Business, National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei 106, Taiwan

Abstract: This paper incorporates the price adjustment model by Amihud and Mendelson [1] with the threshold model to examine stock market investors| multi-asymmetric price adjustment behaviour in seven stock markets from 1980 to 2000. Among the contemporary studies of investor behaviour via the price adjustment model, few, if any, aims at exploring whether and how the adjustment patterns would differ for the markets in differential states and/or with differential level of development. Our empirical findings are consistent with the following notions. First, full price adjustment behaviour is pronounced in stock investors of the more developed markets of the USA, the UK and Germany. Second, the investors in Japanese stock market make full (partial) price adjustments on bad (good) news. Third, the investors in the less developed stock markets including Taiwan and Malaysia react fully (partially) to post (negative) positive returns. Fourth, the investors in the South Korea markets appear to over-react especially during the volatile and bearish regimes.

Keywords: stock market efficiency; partial price adjustment; over price adjustment; bull market; bear market; threshold model; equity security investors; Asian stock markets; investor behaviour; Taiwan; Malaysia; Japan; USA; United States; UK; United Kingdom; Germany; South Korea.

DOI: 10.1504/IJSTM.2005.007514

International Journal of Services Technology and Management, 2005 Vol.6 No.6, pp.599 - 608

Published online: 31 Jul 2005 *

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