Warning Signals of Stock Market Crash during Financial Crisis: Using Hong Kong as an Empirical Study
Yang Zhou, Kexin Zhang

Abstract
There is a large literature using macroeconomic variables such as exchange rate, HIBOR, money supply and T-bill rate, to estimate the likelihood of financial crisis. This paper is a case study of Hong Kong Stock Exchange. The sample period is from 1987 to 2013 to capture the three financial crises. Using Vector Autoregressive (VAR) and Vector Error Correction Models, we find that HIBOR can predict the stock market price in one or two month in advance of the financial crisis.

Full Text: PDF