Testing for relationships between Shanghai and Shenzhen stock markets: A threshold cointegration perspective
AbstractWe 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 InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 392 (2013)
Issue (Month): 18 ()
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Cointegration; Threshold vector error correction model; Cross-correlation; R/S method;
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