Exchange holidays and stock price behavior on the Taiwan stock exchange

AbstractThis paper examines stock price behavior for all stocks listed on the Taiwan Stock Exchange during exchange holidays over 1971–2000. The results indicate significantly higher return volatility for trading time than for non-trading time. Moreover, return volatility in the trading period following bank settlement days is significantly higher than that for the benchmark portfolio. However, return volatility in the trading period following national holidays is about the same as that for the benchmark portfolio. The results are consistent with the prediction of the trading time hypothesis in that private information is generated in business hours but incorporated into stock prices in the subsequent trading period.