Document Type
Conference Proceeding
Publisher
Edith Cowan University
Faculty
Faculty of Business and Law
School
School of Accounting, Finance and Economics
RAS ID
10809
Abstract
This paper examines the volatility dynamics of the greater China stock markets (Shanghai A- and B-shares, Shenzhen A- and B-shares, Taiwan, and Hong Kong) by employing a multivariate (tetravariate) framework that incorporates the features of asymmetries, persistence, and time-varying correlations, which are typically observed in stock markets of developed economies. Our results indicate that, unlike the Shenzhen and Shanghai Ashares, Hong Kong and Taiwan markets, the B-share markets do not exhibit significant asymmetric volatility (“leverage effect”), and return volatility in the A-share market is substantially higher than the B-share market before April 1997, but this result is reversed after that. Also, contrary to the stylized fact that emerging markets exhibit greater fluctuations compared with their more advanced counterparts, the mainland Chinese markets are actually less volatile than the Taiwan and Hong Kong stock exchanges in the late 1990s and early 2000s. In addition, there is strong evidence of volatility persistence in all the markets, and this finding is robust to changes in model specification. The greater China stock markets apparently share a common degree of persistence (fractional integration) in volatility. Moreover, the Shenzhen and Shanghai stock exchanges are positively but not perfectly correlated with each other, with the strength of correlation increasing after the late nineties. Their correlations with the Hong Kong and Taiwan markets are much weaker, and they do not display any clear trends. These findings have important implications for hedging and portfolio management and diversification
Access Rights
free_to_read
Comments
Ho, K., & Zhang, Z. (2010). Financial Market Integration in the Greater China Region: A Multivariate Asymmetric Approach. Proceedings of GMIEER International Conference. (pp. 65p.). . Rendezvous Observation City Hotel, Perth, Australia. Edith Cowan University. Available here