Dynamic Linkages Between the China and International Stock Markets中国与国际股市之间的动态联系.pdfVIP

Asia-Pacific Finan Markets (2009) 16:211–230 DOI 10.1007/s10690-009-9093-5 Dynamic Linkages Between the China and International Stock Markets Kui Fan · Zudi Lu · Shouyang Wang Published online: 7 June 2009 © Springer Science+Business Media, LLC. 2009 Abstract China has become recognized a fourth world economy and is playing a much more important role than ever before in the world economy. In this paper, we study the relationship between the China and the international main stock markets, including the stock markets in the U.S., the U.K., Japan and Hong Kong. Both long- term and short-term dynamic linkages between the China and the international main stock markets are explored by applying a Markov-Switching Vector Error Correction Model (MS-VECM), which takes into account the three regimes of depression, boom and speculation in the market. Our new findings with the data under study include: (i) There has been a significant trend of long-term co-movement between the China and the international stock markets since 1999. (ii) In short term, the stock market in China has been impacted directly or indirectly by the international main stock mar- kets, which varies under different regimes. This impact is still weak in the depression regime, but strong in the boom regime, and, in particular, it has become very strong through the co-integration error correction in the regime of speculation. These findings are different from those documented in the literature and are potentially interesting for international investment and risk management. Keywords Chinese stock market · Markov-switching models · Long/short term linkage · Cointegration · Spillover effect K. Fan · S. Wang Institute of Systems Science, Academy of Mathematics and System Sciences, Chinese Academy of Sciences, 100190 Beijing, China Z. Lu ( ) B Department of Mathematics and Statistics, Curtin University of Technology, Perth, Australia e-mail: zudilu@ Z. Lu School