Market closures and time-varying volatility in the Australian equity market

This study utilises the ARCH class of models to examine the impact of market closures on conditional volatility in the Australian equity market. Market closures prevent trading yet do not prevent the production of information. It is found that trading days following market closures experience an increase in conditional volatility which is consistent with the hypothesis that the production of information over the closure affects volatility (and hence risk) once the market re-opens. These results are robust to GARCH-M and asymmetric GARCH model specifications.