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Interaction among China-related stocks: evidence from a causality test with a new procedure

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Author Info

  • Gary Gang Tian
  • Guang Hua Wan

Abstract

The purpose of this study is to investigate a causal relationship among five different indices of shares issued by Chinese firms, A-, B- and H-shares listed in China and Hong Kong. This article re-examines the interactions among these China-related stocks using daily time series data by constructing a vector autoregresion (VAR) model. A new Granger no-causality testing procedure developed by Toda and Yamamoto was applied to test the causality link among these five stock indices. The results suggest that the 'closed' B-share markets in Shanghai and Shenzhen exhibit causality relations with each other during the entire period between 1993 and 1999 but this pattern does not exist within A-share markets. Furthermore, evidence is also found of Granger causality running from Hong Kong H-shares to B-shares in Shanghai and Shenzhen, and from Shanghai B-shares to all the rest Chinese markets for the post-1996 period.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0960310042000164239
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 1 ()
Pages: 67-72

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Handle: RePEc:taf:apfiec:v:14:y:2004:i:1:p:67-72

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References

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  1. Zapata, Hector O. & Rambaldi, Alicia N., 1996. "Monte Carlo Evidence On Cointegration And Causation," Staff Papers 31690, Louisiana State University, Department of Agricultural Economics and Agribusiness.
  2. John Fernald & John H. Rogers, 1998. "Puzzles in the Chinese stock market," International Finance Discussion Papers 619, Board of Governors of the Federal Reserve System (U.S.).
  3. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  4. Chui, Andy C W & Kwok, Chuck C Y, 1998. "Cross-Autocorrelation between A Shares and B Shares in the Chinese Stock Market," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 21(3), pages 333-53, Fall.
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Cited by:
  1. Shujie Yao & Dan Luo & Stephen Morgan, . "Shanghai Stock Exchange Composite Index and Bank Stock Prices in China: A Causality Analysis," Discussion Papers 08/25, University of Nottingham, GEP.
  2. Huyghebaert, Nancy & Wang, Lihong, 2010. "The co-movement of stock markets in East Asia: Did the 1997-1998 Asian financial crisis really strengthen stock market integration?," China Economic Review, Elsevier, vol. 21(1), pages 98-112, March.
  3. Silvio John Camilleri & Christopher J. Green, 2005. "An Analysis of the Impacts of Non-Synchronous Trading On," Finance 0504020, EconWPA.

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