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The Asymmetry and Volatility of the Chinese Stock Market Caused by the “New National Ten”

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  • Jui-Jung Tsai
  • Yang-Chao Wang
  • Kehuang Weng

Abstract

To curb the excessively rapid rise in housing prices in China, the State Council of China promulgated the New National Ten, which restrains speculative investment behavior and has a linkage effect on the stock market. In this study, we use a series of GARCH models to analyze the effect of the New National Ten on the volatility and asymmetry of the Shanghai Composite Index. Specifically, we investigate how changes in investors’ expectations due to regulations affect the stock market. The result clearly illustrates that this policy is effective in stabilizing the stock market. Investors expect a bullish future stock market and only care about the continuing execution of the policy. Finally, policy implications of our findings are discussed.

Suggested Citation

  • Jui-Jung Tsai & Yang-Chao Wang & Kehuang Weng, 2015. "The Asymmetry and Volatility of the Chinese Stock Market Caused by the “New National Ten”," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(S1), pages 86-98, January.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:s1:p:s86-s98
    DOI: 10.1080/1540496X.2014.998918
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    Cited by:

    1. Yang-Chao Wang & Jui-Jung Tsai & Qiaoqiao Li, 2017. "Policy Impact on the Chinese Stock Market: From the 1994 Bailout Policies to the 2015 Shanghai-Hong Kong Stock Connect," IJFS, MDPI, vol. 5(1), pages 1-19, January.
    2. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.

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