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
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)
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
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 ().