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Integration of China Stock Markets with International Stock Markets: An application of Smooth Transition Conditional Correlation with Double Transition Functions

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Author Info

  • M. Fatih Oztek

    ()
    (Department of Economics, METU)

  • Nadir Ocal

    ()
    (Department of Economics, METU)

Abstract

This paper employs STCC-GARCH and DSTCC-GARCH models to investigate the time varying return co-movements between Chinese stock markets and stock markets of the US, UK, France and Japan. Unlike the earlier literature, we uncover that there are noticeable rising trends in conditional correlations among these markets particularly following the financial reforms in China. Moreover, the empirical results of DSTCC-GARCH specifications with time and various volatility measures indicate that the correlations increase not only over time but also during calm periods for A-shares, though mixed results are obtained for B-shares.

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File URL: http://www.erc.metu.edu.tr/menu/series12/1209.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by ERC - Economic Research Center, Middle East Technical University in its series ERC Working Papers with number 1209.

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Length: 33 pages
Date of creation: Dec 2012
Date of revision: Dec 2012
Handle: RePEc:met:wpaper:1209

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Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Markets Integration and Co-movements;

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References

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