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Hang Seng Index (HSI) Definition
The Hang Seng Index, abbreviated as HSI, is an index of the largest companies traded on the Hong Kong Exchange. The breakdown of the index is weighted based upon the market capitalization of the underlying companies. Each underlying company is sub-categorized into commerce and industry, utilities, finance, and properties. This allows for greater analysis of the index performance. The Hang Seng index includes approximately 65% of the total market capitalization of all companies traded on the index.
A Little More on What is the Hang Seng Index (HSI)
The Hang Seng Index is a subjectiary of the Hang Sange Bank. The index has come to represent the performance of the Hong Kong economy – very similar to the S&P and NASDAQ in the United States. Though many Chinese companies with close relationships with the Hong Kong territory are listed on the HSI.
References for the Hang Seng Index
Academic Research on the Hang Seng Index
Impact of intellectual capital on organisational performance: An empirical study of companies in the Hang Seng Index (Part 1), Hang Chan, K. (2009). The Learning Organization, 16(1), 4-21. The purpose of this paper is to investigate empirically if intellectual capital (IC) has an impact on the financial aspects of organisational performance as well as attempting to identify the IC components that may be the drivers for the leading financial indicators of listed companies. The study sought evidence from the companies of the Hong Kong Stock Exchange.
Price discovery in the Hang Seng index markets: index, futures, and the tracker fund, So, R. W., & Tse, Y. (2004). Journal of Futures Markets: Futures, Options, and Other Derivative Products, 24(9), 887-907. In this paper, price discovery among the Hang Seng Index markets is investigated using the Hasbrouck and Gonzalo and Granger common‐factor models and the multivariate generalized autoregressive conditional heteroskedasticity (M‐GARCH) model. Minute‐by‐minute data from the Hang Seng Index, Hang Seng Index futures, and the tracker fund show that the movements of the three markets are interrelated. The paper suggest that the three markets have different degrees of information processing abilities, although they are governed by the same set of macroeconomic fundamentals.
Multifractal analysis of Hang Seng index in Hong Kong stock market, Sun, X., Chen, H., Wu, Z., & Yuan, Y. (2001). Multifractal analysis of Hang Seng index in Hong Kong stock market. Physica A: Statistical Mechanics and its Applications, 291(1-4), 553-562. In this paper, the daily Hang Seng index in Hong Kong stock market is analyzed by multifractal. The correlation of the parameters of the multifractal spectra with the variation of close return Z is studied statistically.
The distribution and scaling of fluctuations for Hang Seng index in Hong Kong stock market, Wang, B. H., & Hui, P. M. (2001). The distribution and scaling of fluctuations for Hang Seng index in Hong Kong stock market. The European Physical Journal B-Condensed Matter and Complex Systems, 20(4), 573-579. In this paper, the statistical properties of the Hang Seng index in the Hong Kong stock market are analyzed. The paper uses data from minute by minute records of the Hang Seng index from January 3, 1994 to May 28, 1997. Results from this analysis show that the nature of the stochastic process underlying the time series of the returns of Hang Seng index cannot be described by the normal distribution.
Pricing Hang Seng Index options around the Asian financial crisis–A GARCH approach, Duan, J. C., & Zhang, H. (2001). Pricing Hang Seng Index options around the Asian financial crisis–A GARCH approach. Journal of Banking & Finance, 25(11), 1989-2014. This paper investigates how well the Hang Seng Index options, the most important class of option contracts traded in Hong Kong, are priced using the GARCH approach. The paper compares the GARCH model and the Black-Scholes model, and finds the GARCH model to be much better even after a smile or smirk. It also analyses the superiority of this model before and during the Asian financial turmoil.
The January effect and monthly seasonality in the Hang Seng index: 1985-97, Cheung, K. C., & Andrew Coutts, J. (1999). The January effect and monthly seasonality in the Hang Seng index: 1985-97. Applied Economics Letters, 6(2), 121-123. This paper employs a data set of logarithmic nondividend adjusted daily returns from the Hong Kong Stock Exchange Hang Seng Index, over a thirteen and a half year period to investigate the presence of the January effect, or other monthly seasonalities. The paper however finds no result for January effect, or other mothly seasonalities. The paper conclude that this result is peculiar to the Hang Seng Index, as recent studies of other stock exchanges detect some form of monthly seasonalities.
Do expirations of Hang Seng Index derivatives affect stock market volatility?, Bollen, N. P., & Whaley, R. E. (1999). Do expirations of Hang Seng Index derivatives affect stock market volatility?. Pacific-Basin Finance Journal, 7(5), 453-470. This paper examines price and volume data in days surrounding the expirations of the Hong Kong Futures Exchange’s Hang Seng Index (HSI) derivative contracts and finds no evidence of increased stock market volatility.
The intraday pricing efficiency of Hong Kong Hang Seng Index options and futures markets, Fung, J. K., Cheng, L. T., & Chan, K. C. (1997). The intraday pricing efficiency of Hong Kong Hang Seng Index options and futures markets. Journal of Futures Markets: Futures, Options, and Other Derivative Products, 17(7), 797-815.
Net buying pressure, volatility smile, and abnormal profit of Hang Seng Index options, Chan, K. C., Cheng, L. T., & Lung, P. P. (2004). Net buying pressure, volatility smile, and abnormal profit of Hang Seng Index options. Journal of Futures Markets: Futures, Options, and Other Derivative Products, 24(12), 1165-1194. This paper uses the net buying pressure hypothesis of N. P. B. Bollen and R. Whaley (2004) to examine the implied volatilities, options premiums, and options trading profits at various time‐intervals across five different moneyness categories of Hong Kong Hang Seng Index (HSI) options. The paper aims to show that net buying pressure is attributed to hedging activities, and that the net buying pressure on calls is much weaker than that on put options.
Volatility forecasting in the hang seng index using the GARCH approach, Liu, W., & Morley, B. (2009). Volatility forecasting in the hang seng index using the GARCH approach. Asia-Pacific Financial Markets, 16(1), 51-63. The aim of this paper is to add to the literature on volatility forecasting using data from the Hong Kong stock market to determine if forecasts from GARCH based models can outperform simple historical averaging models. The paper also tests for asymmetric adjustment in the Hang Seng, finding strong evidence of asymmetries due to the domination of financial and property firms in this market.
Effects of electronic trading on the Hang Seng Index futures market, Fung, J. K., Lien, D., Tse, Y., & Tse, Y. K. (2005). Effects of electronic trading on the Hang Seng Index futures market. International Review of Economics & Finance, 14(4), 415-425. This paper investigates the switch from open-outcry trading to electronic trading on the Hang Seng Index (HSI) futures. The paper reveals that when this kind of trading is done, that the bid–ask spread narrows and the futures price plays more of a role in information transmission. It also suggests that anonymity in trading and fast order execution in electronic trading, attract informed traders to the futures market, enhancing the information flow.