BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 16/2011:
Co-movements of Shanghai and New York Stock prices by time-varying regressions
Gregory C Chow ()
, Changjiang Liu and Linlin Niu
Abstract: We estimate a time-varying regression model to study the
relationship between returns in the Shanghai and New York stock markets,
with possible inclusion of lagged returns. The parameters of the
regressions reveal that the effect of the current stock return for New York
on that for Shanghai steadily increases after the 1997 Asian financial
crisis and turns significantly and persistently positive after 2002, when
China entered WTO. The effect of the current return for Shanghai on New
York also becomes significantly positive and increasing after 2002. The
upward trend has been interrupted during the recent global financial
crisis, but reaches the level of about 0.4 to 0.5 in 2010 for both markets.
Our results show that China’s stock market has become more and more
integrated into the world market in the past twenty years, with
interruptions occurring during the recent global economic downturn.
Keywords: China; globalization; rate of return; stock markets; time-varying parameter regression; (follow links to similar papers)
JEL-Codes: C29; C50; G14; P43; (follow links to similar papers)
20 pages, August 22, 2011
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