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Testing for Financial Market Integration of the Chinese Market with the US Market

Listed author(s):
  • Hatemi-J, Abdulnasser
  • Mustafa, Alan

This paper investigates empirically whether or not the financial market of China is integrated with the financial market of the US. Unlike most previous studies on financial market integration, we allow for asymmetry in our investigation. The underlying data is transformed into cumulative partial sums by using a software component that is created by authors in Octave language. By estimating the asymmetric generalized impulse response functions we find that the financial markets of these two biggest economies in the world are linked interactively when the markets are falling. However, no significant impact between the two underlying markets are found when markets are rising. These results support the view that allowing for asymmetry in financial markets is important and it has crucial repercussions for both policy makers and investors.

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File URL: https://mpra.ub.uni-muenchen.de/72733/1/MPRA_paper_72733.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 72733.

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Date of creation: 2016
Handle: RePEc:pra:mprapa:72733
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  16. Abdulnasser Hatemi-J & Alan Mustafa, 2016. "TDICPS: OCTAVE module to Transform an Integrated Variable into Cumulative Partial Sums for Negative and Positive Components with Deterministic Trend Parts," Statistical Software Components OCT001, Boston College Department of Economics.
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