CAUSAL LINKAGES AMONG SHANGHAI, SHENZHEN, AND HONG KONG STOCK MARKETS

Hongquan Zhu (), Zudi Lu (), Shouyang Wang () and Abdol Soofi
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Hongquan Zhu: Institute of Systems Science, Academy of Mathematics and System Sciences, Chinese Academy of Sciences, Beijing 100080, China
Zudi Lu: Institute of Systems Science, Academy of Mathematics and System Sciences, Chinese Academy of Sciences, Beijing 100080, China
Shouyang Wang: Institute of Systems Science, Academy of Mathematics and System Sciences, Chinese Academy of Sciences, Beijing 100080, China

International Journal of Theoretical and Applied Finance (IJTAF), 2004, vol. 07, issue 02, 135-149

Abstract: In this paper, we test for causal relationship between China's stock markets by using returns and a measure of volatility for the Shanghai Composite index, the Shenzhen Composite Subindex, and the Hong Kong Hang Seng Index. We also show that the stock index series are nonstationary and that cointegrating vectors and error correction models do not exist for the series.Based on these tests, for the return series, we conclude that Shenzhen Granger caused Shanghai before 1994. For the volatility data, we find that there exists a positive feedback relationship between Shanghai and Shenzhen stock markets, and that Hong Kong volatility Granger causes Shanghai volatility, but not vice versa.

Keywords: Financial integration; volatility; Granger causality; Shanghai stock market; Shenzhen stock market; JEL classification code: G10; G15; G20 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (19)

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DOI: 10.1142/S0219024904002414

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