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An empirical study of the asymmetric cointegration relationships among the Chinese stock markets

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  • Chung-Hua Shen
  • Chien-Fu Chen
  • Li-Hsueh Chen

Abstract

The Enders and Siklos asymmetric cointegration test is employed to examine the long-run asymmetric equilibrium relationships between the Chinese Shanghai and Shenzhen stock markets. Three samples are adopted, which are the whole sample (October 1992 to September 2002); the first subsample before B shares were opened up to the Chinese public (October 1992 to February 2001); and the second subsample after B shares were opened up (February 2001 to September 2002). The estimated results are as follows. First, when the conventional Engle-Granger symmetric cointegration test is used, only the A shares in Shanghai and Shenghen stock exchange market are cointegrated when using the whole sample and the first subsample. However, with the Enders-Siklos M-TAR asymmetric cointegration test, Shenzhen A and B shares stock prices have an asymmetric cointegration relationship after B shares were open, suggesting that openness increases the market efficiency. Furthermore, the two A shares in Shanghai and Shenzhen stock exchanges also have an asymmetric cointegration relationship in the whole sample and the first subsample, implying that although the asymmetric relationship is crucial, it has long been neglected. Finally, it is found that the adjustment speed of Shanghai A shares is faster when deviation from the long-run equilibrium is positive than when it is negative.

Suggested Citation

  • Chung-Hua Shen & Chien-Fu Chen & Li-Hsueh Chen, 2007. "An empirical study of the asymmetric cointegration relationships among the Chinese stock markets," Applied Economics, Taylor & Francis Journals, vol. 39(11), pages 1433-1445.
  • Handle: RePEc:taf:applec:v:39:y:2007:i:11:p:1433-1445
    DOI: 10.1080/00036840600606302
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    Citations

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    Cited by:

    1. Fredj Jawadi & Georges Prat, 2012. "Arbitrage costs and nonlinear adjustment in the G7 stock markets," Applied Economics, Taylor & Francis Journals, vol. 44(12), pages 1561-1582, April.
    2. Zhuo Qiao & Keith Lam, 2011. "Granger causal relations among Greater China stock markets: a nonlinear perspective," Applied Financial Economics, Taylor & Francis Journals, vol. 21(19), pages 1437-1450.
    3. Mohamed El Hédi Arouri & Philippe Foulquier & Julien Fouquau, 2011. "Oil Prices and Stock Markets in Europe: A Sector Perspective," Recherches économiques de Louvain, De Boeck Université, vol. 77(1), pages 5-30.
    4. Shujie Yao & Dan Luo & Stephen Morgan, "undated". "Shanghai Stock Exchange Composite Index and Bank Stock Prices in China: A Causality Analysis," Discussion Papers 08/25, University of Nottingham, GEP.
    5. Ramos, Sofía B. & Veiga, Helena & Wang, Chih-Wei, 2012. "Asymmetric long-run effects in the oil industry," DES - Working Papers. Statistics and Econometrics. WS ws120502, Universidad Carlos III de Madrid. Departamento de Estadística.
    6. Bernard Njindan Iyke, 2015. "On the Term Structure of South African Interest Rates: Cointegration and Threshold Adjustment," Working Papers 557, Economic Research Southern Africa.
    7. Hirata, Hideaki & Otsu, Keisuke, 2016. "Accounting for the economic relationship between Japan and the Asian Tigers," Journal of the Japanese and International Economies, Elsevier, vol. 41(C), pages 57-68.
    8. Zouheir Mighri & Faysal Mansouri, 2016. "Asymmetric price transmission within the Argentinean stock market: an asymmetric threshold cointegration approach," Empirical Economics, Springer, vol. 51(3), pages 1115-1149, November.
    9. Sun, Changyou, 2011. "Price dynamics in the import wooden bed market of the United States," Forest Policy and Economics, Elsevier, vol. 13(6), pages 479-487, July.
    10. Iyke, Bernard Njindan, 2015. "Electricity consumption and economic growth in Nigeria: A revisit of the energy-growth debate," Energy Economics, Elsevier, vol. 51(C), pages 166-176.
    11. repec:eee:joecas:v:12:y:2015:i:2:p:162-172 is not listed on IDEAS

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