Integration of China Stock Markets with International Stock Markets: An application of Smooth Transition Conditional Correlation with Double Transition Functions

Mehmet Fatih Öztek and Nadir Ocal ()
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Nadir Ocal: Department of Economics, METU

No 1209, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: This paper employs STCC-GARCH and DSTCC-GARCH models to investigate the time varying return co-movements between Chinese stock markets and stock markets of the US, UK, France and Japan. Unlike the earlier literature, we uncover that there are noticeable rising trends in conditional correlations among these markets particularly following the financial reforms in China. Moreover, the empirical results of DSTCC-GARCH specifications with time and various volatility measures indicate that the correlations increase not only over time but also during calm periods for A-shares, though mixed results are obtained for B-shares.

Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Markets Integration and Co-movements (search for similar items in EconPapers)
JEL-codes: C32 C58 F36 G15 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2012-12, Revised 2012-12
New Economics Papers: this item is included in nep-tra
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http://erc.metu.edu.tr/en/system/files/menu/series12/1209.pdf First version, 2012 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:met:wpaper:1209

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