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Internal Market Efficiency, Market Co-movement, and Cross-Market Efficiency: The Case of Hong Kong and Shanghai Stock Markets

Author

Listed:
  • Ebenezer Asem

    (University of Lethbridge)

  • Vishaal Baulkaran

    (University of Lethbridge)

  • Rossitsa Yalamova

    (University of Lethbridge)

  • Xiaofei Zhang

    (Citic Future)

Abstract

We examine the effects of the 2008 financial crisis on the cross-market efficiency of the Hong Kong and Shanghai stock markets. Our results show a sharp decline in the cross-market efficiency during the financial crisis. We investigate whether this is due to lower internal market efficiency or higher market co-movement. The results show no evidence that the internal market efficiency dropped in Hong Kong or Shanghai during the crisis. In contrast, we document a strong increase in the market co-movement during the crisis. These results suggest that the decline in cross-market efficiency during the financial crisis is due to increased market co-movement and not a decline in internal market efficiency.

Suggested Citation

  • Ebenezer Asem & Vishaal Baulkaran & Rossitsa Yalamova & Xiaofei Zhang, 2017. "Internal Market Efficiency, Market Co-movement, and Cross-Market Efficiency: The Case of Hong Kong and Shanghai Stock Markets," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 24(4), pages 253-267, December.
    • Handle: RePEc:kap:apfinm:v:24:y:2017:i:4:d:10.1007_s10690-017-9232-3
    DOI: 10.1007/s10690-017-9232-3
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    More about this item

    Keywords

    Cross-market efficiency; Co-movement; Internal market efficiency; Entropy; Wavelet; Mutual information;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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