International Research Journal of Finance and Economics ISSN 1450-2887 Issue 62 (2011) © EuroJournals Publishing, Inc. 2011 http://www.eurojournals.com/finance.htm Determinant Factors of Hong Kong Stock Market Alexandros E. Garefalakis Accounting Department, Technological Education Institute of Crete, 71004 Iraklio, Greece E-mail: garefalakis@teicrete.gr Tel +0030-6973013769 Augustinos Dimitras Department of Social Science, Hellenic Open University, Parodos Aristotelous St., Patra, Greece E-mail: dimitras@eap.gr Tel +0030-2610-367448 Fax: +0030-2610 367442 Dimitris Koemtzopoulos Economics Department, Technological Education Institute of Western Macedonia 50100 kozani, Greece E-mail: dkoemtzopoulos@aktoweb.com Tel +0030-6937274707 Konstantinos Spinthiropoulos Financial Department, Technological Education Institute of Western Macedonia 50100 kozani, Greece E-mail: spinthiropoulos_k@yahoo.gr Tel +0030-6937708814 Abstract The purpose of this paper is to explore the effects of equity, energy, gold and currency indicators on Hang Seng index. The results suggest that the major stock markets, and particularly the SP500, positively influence the Hong Kong stock market, a fact that is attributed to the integration and internationalization of stock markets. This study, also, provides evidence that crude oil, as a proxy for economic activity and playing a substantial role to modern portfolio formation, affect, also, positively the Hong Kong stock market. Furthermore, the results show that the volatility of the gold returns influence negatively the mean return of the Hang Seng index. Finally, our findings show that the Hang Seng index return volatility has reveals the asymmetric phenomenon as it appears to be more volatile in response to negative shocks caused by lower Hang Seng index prices. Keywords: GJR-GARCH model, Stock market, Gold, Crude oil, Exchange rates JEL Classification Codes: G14, G15, C22 1. Introduction The Hong Kong Stock Exchange (HKSE), established at the end of the 19th century, today, with its total securities market capitalization of a record sum of HK$ 8,260.3bn (US$ 1,063.9 trillion), ranks 8th place by market capitalization in the world. The Hang Seng (HSI), started in 1969, is the leading