An Event Study of Chinese Tourists to Taiwan

Tinbergen Institute Discussion Paper 2018-003/III

98 Pages Posted: 17 Jan 2018

See all articles by Chia-Lin Chang

Chia-Lin Chang

National Chung Hsing University - Department of Applied Economics, Department of Finance

Shu-Han Hsu

National Chung Hsing University

Michael McAleer

Erasmus University Rotterdam - Erasmus School of Economics, Econometric Institute; Tinbergen Institute; University of Tokyo - Centre for International Research on the Japanese Economy (CIRJE), Faculty of Economics

Date Written: January 11, 2018

Abstract

The number of Chinese tourists visiting Taiwan has been closely related to the political relationship across the Taiwan Strait. The occurrence of political events and disasters or accidents have had, and will continue to have, a huge impact on the Taiwan tourism market. To date, there has been relatively little empirical research conducted on this issue. In this paper, tourists are characterized as being involved in one of three types of tourism: group tourism (group-type), individual tourism (individual-type), and medical cosmetology (medical-type). We use McAleer’s (2015) fundamental equation in tourism finance to examine the correlation that exists between the rate of change in the number of tourists and the rate of return on tourism. Second, we use the event study method to observe whether the numbers of tourists have changed abnormally before and after the occurrence of major events on both sides of the Strait. Three different types of conditional variance models, namely, GARCH (1,1), GJR (1,1) and EGARCH (1,1), are used to estimate the abnormal rate of change in the number of tourists. The empirical results concerning the major events affecting the changes in the numbers of tourists from China to Taiwan are economically significant, and confirm which types of tourists are most likely to be affected by such major events.

Keywords: Event study, Abnormal rate of change, Chinese tourists, OLS, GARCH, GJR, EGARCH, Tourism finance.

JEL Classification: G14, C22, C52, C58

Suggested Citation

Chang, Chia-Lin and Hsu, Shu-Han and McAleer, Michael, An Event Study of Chinese Tourists to Taiwan (January 11, 2018). Tinbergen Institute Discussion Paper 2018-003/III, Available at SSRN: https://ssrn.com/abstract=3100211 or http://dx.doi.org/10.2139/ssrn.3100211

Chia-Lin Chang (Contact Author)

National Chung Hsing University - Department of Applied Economics, Department of Finance ( email )

Taichung, Taiwan
China

Shu-Han Hsu

National Chung Hsing University ( email )

402, No. 250 Kuo Kuang Road, Taiwan
Taichung, Taiwan
China

Michael McAleer

Erasmus University Rotterdam - Erasmus School of Economics, Econometric Institute ( email )

Rotterdam
Netherlands

Tinbergen Institute

Rotterdam
Netherlands

University of Tokyo - Centre for International Research on the Japanese Economy (CIRJE), Faculty of Economics

Tokyo
Japan

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