Hong Kong: A Bridge Connecting Mainland China and the International Market

Zhenxi Chen, Jan Kiviet and Weihong Huang
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Weihong Huang: Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.

No 1406, Economic Growth Centre Working Paper Series from Nanyang Technological University, School of Social Sciences, Economic Growth Centre

Abstract: Chow et al. (2011) apply three time-varying parameter methods to investigate the relationship between the stock markets of Shanghai and New York and find that the mutual influence between the two markets has increased since 2002. We reconsider their approaches and find that two suffer from parameter underidentification and all three from underspecification of the parameter variation. We include Hong Kong in an analysis based on standard and partial correlations over a running window in order to depict the change in the mutual relationships between these three markets. It is found that the observed increasing co-movement between Shanghai and New York is mainly due to the channel of Hong Kong. So Hong Kong appears to connect mainland China with the global market.

Keywords: China; Co-movement, Globalization; Specification analysis, Stock markets (search for similar items in EconPapers)
JEL-codes: C29 C58 G14 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2014-05
New Economics Papers: this item is included in nep-cna, nep-sea and nep-tra
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