Empirical analysis of dynamic correlations of stock returns: evidence from Chinese A-share and B-share markets
AbstractThis paper examines the dynamic correlation structure between A-share and B-share stock returns based on three different measures of correlation coefficients. Testing the models by employing daily stock-return data for the period from 1996 through 2003, we reach the following empirical conclusions. First, the correlation coefficients between A-share and B-share stock returns are time varying. Second, the dynamic path of the correlation coefficients indicates that the correlation coefficients are significantly correlated with the trend factor. Third, there is a substantial spillover effect from the Asian crisis to Chinese stock-return dynamic correlations. Fourth, the evidence suggests that the time-varying correlations are significantly associated with excessive trading activity as measured by excessive trading volumes and high-low price differentials. Fifth, the correlation between A-share and B-share markets has increased since the relaxation of the restriction on B-share market investments by domestic investors.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Quantitative Finance.
Volume (Year): 7 (2007)
Issue (Month): 6 ()
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- Weber, Enzo & Zhang, Yanqun, 2012.
"Common influences, spillover and integration in Chinese stock markets,"
Journal of Empirical Finance,
Elsevier, vol. 19(3), pages 382-394.
- Enzo Weber & Yanqun Zhang, 2008. "Common Influences, Spillover and Integration in Chinese Stock Markets," SFB 649 Discussion Papers SFB649DP2008-072, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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