Policy Impact on the Chinese Stock Market: From the 1994 Bailout Policies to the 2015 Shanghai-Hong Kong Stock Connect

Yang-Chao Wang, Jui-Jung Tsai and Qiaoqiao Li
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Yang-Chao Wang: Newhuadu Business School, Minjiang University, Fuzhou 350108, China
Jui-Jung Tsai: Newhuadu Business School, Minjiang University, Fuzhou 350108, China
Qiaoqiao Li: Nottingham University Business School, Jubilee Campus, Nottingham NG8 1BB, UK

IJFS, 2017, vol. 5, issue 1, 1-19

Abstract: From the 1994 bailout policies to the 2015 Shanghai-Hong Kong Stock Connect, the policy impact on the Chinese stock market has changed over time. By May 2015, global investors can directly invest in a more legalized and normalized Chinese stock market, whereas they are still concerned about the policy-oriented market and its attendant risks. In this study, we employ the family of GARCH models to investigate the structural changes in risks with the implementation of a series of policies. Our results show that although many policies improve or stabilize the stock market, certain policies lead to substantial volatility. Among them, macro-control policies and transaction cost adjustments are a double-edged sword, which should be used with caution. Furthermore, with opening-up policies being launched recently, the Chinese stock market has entered a new stage in which it affects international capital markets. However, the increased risks, which may result in a sharp turnaround, cause worry.

Keywords: Chinese stock market; policy and regulation; Shanghai-Hong Kong Stock Connect; volatility; GARCH (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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