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Interactions of stock markets within the greater China economic bloc

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  • Seungwook Bahng
  • Seung-Myo Shin

Abstract

This paper investigates what types of mutual relationships exist among the stock markets of the Greater China economic bloc, which include stock markets in Hong Kong and Taiwan, as well as stock markets in Shanghai and Shenzhen. Using the unit root test, co-integration analysis, and vector error correction model (VECM), this paper analyzes interrelationships among daily stock indices for the period from the beginning of 1992 to the end of 2001. Test results indicate the existence of one co-integrating vector, implying that a long-run equilibrium relationship holds among the four stock indices. Variance decomposition of forecast errors provides evidence that the Shenzhen stock market is the market most heavily influenced by the unexpected variations of other markets in the Greater China economic bloc.

Suggested Citation

  • Seungwook Bahng & Seung-Myo Shin, 2004. "Interactions of stock markets within the greater China economic bloc," Global Economic Review, Taylor & Francis Journals, vol. 33(3), pages 43-60.
    • Handle: RePEc:taf:glecrv:v:33:y:2004:i:3:p:43-60
    DOI: 10.1080/12265080408449854
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Ahmed, Abdullahi D. & Huo, Rui, 2019. "Impacts of China's crash on Asia-Pacific financial integration: Volatility interdependence, information transmission and market co-movement," Economic Modelling, Elsevier, vol. 79(C), pages 28-46.
    3. Dungey, Mardi & Vehbi, Tugrul & Martin, Charlton, 2014. "VAR modelling in the presence of China’s rise : an application to the Taiwanese economy," Working Papers 2014-09, University of Tasmania, Tasmanian School of Business and Economics.
    4. Priscilla Swartz, 2006. "Global Versus Regional Systematic Risk and International Asset Allocations in Asia," Annals of Economics and Finance, Society for AEF, vol. 7(1), pages 77-89, May.

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