EconPapers    
Economics at your fingertips  
 

Stock Market Integration and Financial Crises: Evidence from Chinese Sectoral Portfolios

Hong Li () and Vincent Daly ()
Additional contact information
Hong Li: Business School, University of Nottingham, U.K.
Vincent Daly: Economics Department, Kingston University, U.K.

Review of Economics & Finance, 2017, vol. 10, 33-48

Abstract: This paper assesses China's integration with the global stock market during crisis and non-crisis periods within a two-beta Capital Asset Pricing Model framework. We obtain timevarying global and national systematic risks for ten Chinese sectors from a state-space representation and investigate how these risks are priced within and without crisis. Crisis is modelled by, firstly, a dummy variable approach and, secondly, the Markov regime-switching technique. Consistent with the literature, the degree of integration with the global market is found to be strengthened in crises. Complete integration is, however, only evident in the recent financial crisis and then not in all sectors. In other high-volatility episodes, partial integration is more evident, suggesting the opportunity for international risk diversification into China even in crises. Particular to the Chinese context, the weak integration of some sectors that appear to show financial openness may be because public sector equity holdings leave those sectors exposed to national systematic risk through a political channel.

Keywords: Asset pricing; Financial crisis; Regime-switching; Stock market integration; Time-varying systematic risk (search for similar items in EconPapers)
JEL-codes: C32 F36 G12 G15 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.bapress.ca/ref/ref-article/1923-7529-2017-04-33-16.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bap:journl:170403

Ordering information: This journal article can be ordered from
17 Alton Towers Circle, Unit 101 Toronto, ON, M1V3L8, Canada

Access Statistics for this article

Review of Economics & Finance is currently edited by H. Carlson

More articles in Review of Economics & Finance from Better Advances Press, Canada 17 Alton Towers Circle, Unit 101 Toronto, ON, M1V3L8, Canada.
Series data maintained by Carlson ().

 
Page updated 2017-12-04
Handle: RePEc:bap:journl:170403