Impact of G8 Stock Markets on Chinese Stock Market
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Authors
Habib, Ashfaq
Khan, Muhammad Asif
Hull, Robert M.
Issue Date
2022-05-01
Type
Working Paper
Language
en_US
Keywords
Cointegration , Stock market - China , Stock market - G7 , Stock market - G8 , Times Series , VECM
Alternative Title
Abstract
We extend the stock market integration research by exploring the linkages among nine large stock markets that include former GS nations (current G7 and Russia) and China. We use a crisis-free period of 2009-2019 to avoid detecting linkages caused by interdependencies created by a major crisis. Our major purpose is to examine the impact of GS stock markets on China's market. We use standard time series methods: stationarity tests (ADF and PP unit root); long-run correlation tests (Johansen integration involving trace and maximum eigenvalue); impact of GS markets on China's market (VECM test); influence of GS markets on volatility in China's market (variance decomposition analysis); and, effect from shocks in GS markets on China's market (impulse response function). Major findings include the following. First, except for Germany and Russia, all markets have a significant causal influence on China with UK's market having the greatest influence. Second, GS markets are not the major source of short-run fluctuation in China's market but over time can exercise a noteworthy impact with the UK market manifesting the largest impact. Third, there are occasions for international portfolio diversification with China's market providing the greatest potential. Fourth, all markets provide a short-run window of profit opportunity.
Description
Citation
Publisher
Washburn University. School of Business