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Examining Stock Volatility in the Segmented Chinese Stock Markets: A SWARCH Approach

Listed author(s):
  • Zhuo Qiao
  • Weiwei Qiao
  • Wing-Keung Wong

This study adopts the SWARCH model to examine the volatile behavior and volatility linkages among the four major segmented Chinese stock indices. We find strong evidence of a regime shift in the volatility of the four markets, and the SWARCH model appears to outperform standard generalized autoregressive conditional heteroskedasticity (GARCH) family models. The evidence suggests that, compared with the A-share markets, B-share markets stay in a high-volatility state longer and are more volatile and shift more frequently between high- and low-volatility states. In addition, the relative magnitude of the high-volatility compared with that of the low-volatility state in the B-share markets is much greater than the case in the two A-share markets. B-share markets are found to be more sensitive to international shocks, while A-share markets seem immune to international spillovers of volatility. Finally, analyses of the volatility spillover effect among the four stock markets indicate that the A-share markets play a dominant role in volatility in Chinese stock markets.

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Article provided by Taylor & Francis Journals in its journal Global Economic Review.

Volume (Year): 39 (2010)
Issue (Month): 3 ()
Pages: 225-246

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Handle: RePEc:taf:glecrv:v:39:y:2010:i:3:p:225-246
DOI: 10.1080/1226508X.2010.513138
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