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Global and Regional Links between Stock Markets - the Case of Russia and China

  • Kozluk, Tomasz

    ()

    (BOFIT)

In a broad sample of developed and emerging economies over the past ten years we apply the approximate factor model in a search for common global and regional driving-forces in stock market returns and volatility. We focus particularly on two emerging stock markets - Russia and China, because of their unique characteristics and performance in the past years. We find that while Russian markets, like the CEEC region, substantially increased their integration with global stock markets, both the Chinese A- and B-share markets continued to move largely independently from global movements and only slightly increased in comovement with regional forces. We provide evidence of a general increase in global comovement of stock markets over the past decade and a decline in the role of regional forces, which imply a decrease of the effectiveness of cross-country hedging strategies.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/DP0408.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 4/2008.

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Length: 42 pages
Date of creation: 21 Apr 2008
Date of revision:
Handle: RePEc:hhs:bofitp:2008_004
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
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  1. Nicolaas Groenewold & Sam Hak Kan Tang & Yanrui Wu, 2002. "The Dynamic Interrelationships Between the Greater China Share Markets," Economics Discussion / Working Papers 02-02, The University of Western Australia, Department of Economics.
  2. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, vol. 70(1), pages 191-221, January.
  3. Wang, Ping & Liu, Aying & Wang, Peijie, 2004. "Return and risk interactions in Chinese stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(4), pages 367-383, October.
  4. John Fernald & John H. Rogers, 1998. "Puzzles in the Chinese stock market," International Finance Discussion Papers 619, Board of Governors of the Federal Reserve System (U.S.).
  5. Jushan Bai, 2003. "Inferential Theory for Factor Models of Large Dimensions," Econometrica, Econometric Society, vol. 71(1), pages 135-171, January.
  6. Forni, Mario & Reichlin, Lucrezia, 2001. "Federal policies and local economies: Europe and the US," European Economic Review, Elsevier, vol. 45(1), pages 109-134, January.
  7. Robert Brooks & Vanitha Ragunathan, 2003. "Returns and volatility on the Chinese stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 13(10), pages 747-752.
  8. Pedro Cerqueira, 2011. "How Pervasive is the World Business Cycle?," Open Economies Review, Springer, vol. 22(1), pages 119-142, February.
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