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Policy change and lead-lag relations among China's segmented stock markets

Zhuo Qiao, Yuming Li and Wing-Keung Wong ()

Journal of Multinational Financial Management, 2008, vol. 18, issue 3, 276-289

Abstract: This paper uses linear and nonlinear Granger causality tests to study the lead-lag relations among China's segmented stock markets. In contrast to the weak lead-lag relation among A- and B-share markets disclosed by its linear counterpart, a nonlinear causality test provides evidence of strong bi-directional causal relations between two A-share markets as well as between two B-share markets. In addition, the evidence shows that since the implementation of a new policy allowing domestic citizens to invest in B-share markets, A-share markets tend to lead their B-share counterparts in the same stock exchange and B-share markets continue to lead the H-share market.

Date: 2008
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