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Long-run equilibrium, short-term adjustment, and spillover effects across Chinese segmented stock markets and the Hong Kong stock market

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  • Qiao, Zhuo
  • Chiang, Thomas C.
  • Wong, Wing-Keung

Abstract

This paper adopts a novel FIVECM-BEKK GARCH approach to examine the bilateral relationships among the A-share and B-share stock markets in China and the Hong Kong stock market. The evidence shows that these stock markets are fractionally cointegrated. Analyses of the spillover effects across these markets indicate that the A-share markets are most influential. The relaxation of government restrictions on the purchase of B shares by domestic residents accelerates the market integration process of A-share markets with the B-share and Hong Kong markets. The effects of the Asian crisis on the stock-return dynamic correlations vary across these markets.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 18 (2008)
Issue (Month): 5 (December)
Pages: 425-437

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Handle: RePEc:eee:intfin:v:18:y:2008:i:5:p:425-437

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  1. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, Econometric Society, vol. 59(5), pages 1279-313, September.
  2. Cheung, Yin-Wong & Lai, Kon S., 1995. "A search for long memory in international stock market returns," Journal of International Money and Finance, Elsevier, Elsevier, vol. 14(4), pages 597-615, August.
  3. Saikkonen, Pentti, 1991. "Asymptotically Efficient Estimation of Cointegration Regressions," Econometric Theory, Cambridge University Press, vol. 7(01), pages 1-21, March.
  4. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
  5. Sugato Chakravarty & Asani Sarkar & Lifan Wu, 1998. "Information asymmetry, market segmentation, and the pricing of cross-listed shares: theory and evidence from Chinese A and B shares," Research Paper 9820, Federal Reserve Bank of New York.
  6. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
  7. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, Elsevier, vol. 1(1), pages 83-106, June.
  8. Li, Yuming & Yan, Daying & Greco, Joe, 2006. "Market segmentation and price differentials between A shares and H shares in the Chinese stock markets," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 16(3), pages 232-248, July.
  9. Yeh, Yin-Hua & Lee, Tsun-siou & Pen, Jen-fu, 2002. " Stock Returns and Volatility under Market Segmentation: The Case of Chinese A and B Shares," Review of Quantitative Finance and Accounting, Springer, vol. 18(3), pages 239-57, May.
  10. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
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Cited by:
  1. Wong, Wing-Keung & McAleer, Michael, 2009. "Mapping the Presidential Election Cycle in US stock markets," Mathematics and Computers in Simulation (MATCOM), Elsevier, Elsevier, vol. 79(11), pages 3267-3277.
  2. Enzo Weber & Yanqun Zhang, 2008. "Common Influences, Spillover and Integration in Chinese Stock Markets," SFB 649 Discussion Papers SFB649DP2008-072, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Guidi, Francesco, 2010. "Cointegration relationship and time varying co-movements among Indian and Asian developed stock markets," MPRA Paper 19853, University Library of Munich, Germany.
  4. Lehkonen, Heikki, 2010. "Bubbles in China," International Review of Financial Analysis, Elsevier, vol. 19(2), pages 113-117, March.

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