The role of Chinese stock market in global stock markets: A safe haven or a hedge?
The contribution of the study is threefold. First, the paper proposes a new empirically testable definition for a safe haven and a hedge from the viewpoint of extreme and regular dependences measured by a modern statistical tool of copulas. Second, this paper investigates the extreme and regular dependences between the Chinese and the G7 stock markets, using a mixture copula specification, and the results reveal that the Chinese stock market has been not only a hedge but also a safe haven for the G7 stock markets all these years. Finally, this study suggests that the Chinese stock market is the target market for global stock fund managers and international investors, who are seeking a hedge or a safe haven for their portfolios, under turbulence.
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- Dirk G. Baur & Brian M. Lucey, 2007.
"Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold,"
The Institute for International Integration Studies Discussion Paper Series
- Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, 05.
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- Fortin, Ines & Kuzmics, Christoph, 2002. "Tail-Dependence in Stock-Return Pairs," Economics Series 126, Institute for Advanced Studies.
- Andrew Patton, 2004.
"Modelling Asymmetric Exchange Rate Dependence,"
wp04-04, Warwick Business School, Finance Group.
- Kaul, Aditya & Sapp, Stephen, 2006. "Y2K fears and safe haven trading of the U.S. dollar," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 760-779, August.
- Chan, Kam C. & Fung, Hung-Gay & Thapa, Samanta, 2007. "China financial research: A review and synthesis," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 416-428.
- Lai, YiHao & Chen, Cathy W.S. & Gerlach, Richard, 2009. "Optimal dynamic hedging via copula-threshold-GARCH models," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(8), pages 2609-2624.
- Xu, Cheng Kenneth, 2000. "The microstructure of the Chinese stock market," China Economic Review, Elsevier, vol. 11(1), pages 79-97.
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