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

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

Volume (Year): 1 (2003)
Issue (Month): 1 (January)
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;

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References listed on IDEAS
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  5. Lan Yisheng, . "The Stock Market In China: Problems And Prospects For Domestic And Foreign Investment," Working Papers 97_7, Chinese Economies Research Centre.
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  7. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March. [Downloadable!] (restricted)
  8. Chen, Gongmeng & Kwok, Chuck C. Y. & Rui, Oliver M., 2001. "The day-of-the-week regularity in the stock markets of China," Journal of Multinational Financial Management, Elsevier, vol. 11(2), pages 139-163, April. [Downloadable!] (restricted)
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  11. 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.). [Downloadable!]
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  12. Sjoo, Boo & Zhang, Jianhua, 2000. "Market segmentation and information diffusion in China's stock markets," Journal of Multinational Financial Management, Elsevier, vol. 10(3-4), pages 421-438, December. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mohamed El Hedi AROURI & Chen Xiang LIU, 2008. "Stock craze: an empirical analysis of PER in Chinese equity market," Economics Bulletin, Economics Bulletin, vol. 14(1), pages 1-17. [Downloadable!]
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