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Testing for Financial Market Integration of the Chinese Market with the US Market

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  • Hatemi-J, Abdulnasser
  • Mustafa, Alan

Abstract

This paper investigates empirically whether or not the financial market of China is integrated with the financial market of the US. Unlike most previous studies on financial market integration, we allow for asymmetry in our investigation. The underlying data is transformed into cumulative partial sums by using a software component that is created by authors in Octave language. By estimating the asymmetric generalized impulse response functions we find that the financial markets of these two biggest economies in the world are linked interactively when the markets are falling. However, no significant impact between the two underlying markets are found when markets are rising. These results support the view that allowing for asymmetry in financial markets is important and it has crucial repercussions for both policy makers and investors.

Suggested Citation

  • Hatemi-J, Abdulnasser & Mustafa, Alan, 2016. "Testing for Financial Market Integration of the Chinese Market with the US Market," MPRA Paper 72733, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:72733
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial Market Integration; Asymmetry; Impulses; US; China; Octave;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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