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An Empirical Analysis Of Co-movement For Shanghai, Hong Kong And America Stock Markets

Posted on:2009-03-25Degree:MasterType:Thesis
Country:ChinaCandidate:J J HeFull Text:PDF
GTID:2189360245965767Subject:Financial and investment management
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This paper uses unit root test, co-integration test and Granger causality test to analyze co-integration relationship and long run equilibrium among China mainland, Hong Kong and the U.S. stock markets from January 4, 1994 to December 31, 2007. Based on the data, we build ECM. Besides, we use variable decomposition and impulse response function to detect the change in co-movement relationship among China mainland, Hong Kong and the U.S. stock markets as exogenous variables change. According to empirical analysis, we find:There only exists the first difference integration in index of Shanghai, Hong Kong and America stock. We analyze co-integration relation in Shanghai, Hong Kong and America. The result indicates they exists co-integration and long run equilibrium in the third sub-period. In the same period, Granger causality test examines the causality relationship between the stock markets in China mainland, Hong Kong and America, respectively. ECM indicates Shanghai, Hengsheng and S&P 500 index can recur equilibrium when they deviate from equilibrium. ECM also supports the consequence of the Granger causality test. It can also be seen that the change of China mainland stock market can be explained by the other markets at a low level, but, Hong Kong market can interpret the volatility of America market at a large margin related to China mainland market. Every stock markets responses impetuosity, when they impact themselves by one criterion of themselves. But the persisting period of effect of this response to the external attack is just for only a few days.In conclusion, compared to two previous sub-periods, in the third sub-periods, there is a co-movement relationship between mainland, Hong Kong and America markets. Although this consequence of the co-movement is not significant, the trend of one of the three markets can be inferred according to the other two markets.
Keywords/Search Tags:Stock market co-movement, Unit Root test, Co-integration test, ECM, Variable decomposition, Impulse response function
PDF Full Text Request
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