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The Chinese Stock Market: A Casino with 'Buffer Zones'?

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  • Eric Girardin
  • Zhenya Liu

Abstract

This paper uses Markov-switching techniques to examine the presence of different market conditions on the Shanghai A-share market since the start of active trading in the mid-1990s. The originality of the paper lies in the identification of three contrasting regimes: a speculative market, a bull market and a bear market. Overall, the 'Casino' character of the Chinese stock market is the main feature that is substantiated by the present paper. However, the bull market regime is always a buffer zone between the other two regimes. After early 1997, an investor with a weekly horizon most of the time finds herself in the bear market and makes capital losses. Only during very short periods of 'luck' does she make substantial capital gains, which on average will compensate her for the losses.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Chinese Economic and Business Studies.

Volume (Year): 1 (2003)
Issue (Month): 1 ()
Pages: 57-70

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Handle: RePEc:taf:jocebs:v:1:y:2003:i:1:p:57-70

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Related research

Keywords: Markov-switching; Chinese Stock Market;

References

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  1. Dongwei Su, 2000. "Asset Pricing in A Segmented Emerging Market," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 387-412, November.
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  12. Tsui, Albert K. & Yu, Qiao, 1999. "Constant conditional correlation in a bivariate GARCH model: evidence from the stock markets of China," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 48(4), pages 503-509.
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Citations

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Cited by:
  1. Chen Xiang LIU & Mohamed El Hedi AROURI, 2008. "Stock craze: an empirical analysis of PER in Chinese equity market," Economics Bulletin, AccessEcon, vol. 14(1), pages 1-17.
  2. Eric Girardin & Zhenya Liu, 2007. "The financial integration of China: New evidence on temporally aggregated data for the A-share market," Money Macro and Finance (MMF) Research Group Conference 2006 160, Money Macro and Finance Research Group.
  3. Girardin, Eric & Joyeux, Roselyne, 2013. "Macro fundamentals as a source of stock market volatility in China: A GARCH-MIDAS approach," Economic Modelling, Elsevier, vol. 34(C), pages 59-68.
  4. repec:ebl:ecbull:v:14:y:2008:i:1:p:1-17 is not listed on IDEAS
  5. Fabian Lipinsky & Li Lian Ong, 2014. "Asia’s Stock Markets: Are There Crouching Tigers and Hidden Dragons?," IMF Working Papers 14/37, International Monetary Fund.
  6. He, Yinghua & Nielsson, Ulf & Guo, Hong & Yang, Jiong, 2014. "Subscribing to transparency," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 189-206.

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