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Testing for relationships between Shanghai and Shenzhen stock markets: A threshold cointegration perspective

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  • Lin, Xiaoqiang
  • Tang, Zhenpeng
  • Fei, Fangyu
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    Abstract

    We investigate the relationships between Shanghai and Shenzhen stock market, and reveal the evidence of cross-correlations between the two stock markets. Our main findings show that Shanghai and Shenzhen stock market are cointegrated, and also present the evidence of strong error-correction effect in the short-rate equation, whereas the point estimate for the error-correction term is small and not statistical significance in the long-rate equation. Finally, Shanghai stock market ECT coefficient shows the evidence of long-term equilibrium in the first regime, while in the second regime the coefficient of correction term is larger than that of the first regime, indicating the rate convergence to long-term equilibrium is not uniform.

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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 392 (2013)
    Issue (Month): 18 ()
    Pages: 4064-4074

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    Handle: RePEc:eee:phsmap:v:392:y:2013:i:18:p:4064-4074

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: Cointegration; Threshold vector error correction model; Cross-correlation; R/S method;

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