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Hong Kong: A Bridge Connecting Mainland China and the International Market

Author

Listed:
  • Zhenxi CHEN

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)

  • Jan F. KIVIET

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)

  • Weihong Huang

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)

Abstract

Chow et al. (2011) apply three time-varying parameter methods to investigate the relationship between the stock markets of Shanghai and New York and find that the mutual influence between the two markets has increased since 2002. We reconsider their approaches and find that two suffer from parameter underidentification and all three from underspecification of the parameter variation. We include Hong Kong in an analysis based on standard and partial correlations over a running window in order to depict the change in the mutual relationships between these three markets. It is found that the observed increasing co-movement between Shanghai and New York is mainly due to the channel of Hong Kong. So Hong Kong appears to connect mainland China with the global market.

Suggested Citation

  • Zhenxi CHEN & Jan F. KIVIET & Weihong Huang, 2014. "Hong Kong: A Bridge Connecting Mainland China and the International Market," Economic Growth Centre Working Paper Series 1406, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    • Handle: RePEc:nan:wpaper:1406
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    References listed on IDEAS

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    5. Huang, Bwo-Nung & Yang, Chin-Wei & Hu, John Wei-Shan, 2000. "Causality and cointegration of stock markets among the United States, Japan and the South China Growth Triangle," International Review of Financial Analysis, Elsevier, vol. 9(3), pages 281-297.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    China; Co-movement; Globalization; Specification analysis; Stock markets;
    All these keywords.

    JEL classification:

    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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