Please use this identifier to cite or link to this item: https://hdl.handle.net/2440/57061
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Type: Journal article
Title: Dynamic Linkages Between the China and International Stock Markets
Author: Fan, K.
Lu, Z.
Wang, S.
Citation: Asia-Pacific Financial Markets, 2009; In Press(3):1-20
Publisher: Kluwer Academic Publishers Group
Issue Date: 2009
ISSN: 1387-2834
1573-6946
Statement of
Responsibility: 
Kui Fan, Zudi Lu and Shouyang Wang
Abstract: China has become recognized a fourth world economy and is playing a much more important role than ever before in the world economy. In this paper, we study the relationship between the China and the international main stock markets, including the stock markets in the U.S., the U.K., Japan and Hong Kong. Both long-term and short-term dynamic linkages between the China and the international main stock markets are explored by applying a Markov-Switching Vector Error Correction Model (MS-VECM), which takes into account the three regimes of depression, boom and speculation in the market. Our new findings with the data under study include: (i) There has been a significant trend of long-term co-movement between the China and the international stock markets since 1999. (ii) In short term, the stock market in China has been impacted directly or indirectly by the international main stock markets, which varies under different regimes. This impact is still weak in the depression regime, but strong in the boom regime, and, in particular, it has become very strong through the co-integration error correction in the regime of speculation. These findings are different from those documented in the literature and are potentially interesting for international investment and risk management.
Keywords: Chinese stock market
Markov-switching models
Long/short term linkage
Cointegration
Spillover effect
Description: © Springer Science+Business Media, LLC. 2009
DOI: 10.1007/s10690-009-9093-5
Appears in Collections:Aurora harvest 5
Mathematical Sciences publications

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