Testing for relationships between Shanghai and Shenzhen stock markets: A threshold cointegration perspective

Xiaoqiang Lin, Zhenpeng Tang and Fangyu Fei

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 18, 4064-4074

Abstract: We investigate the relationships between Shanghai and Shenzhen stock market, and reveal the evidence of cross-correlations between the two stock markets. Our main findings show that Shanghai and Shenzhen stock market are cointegrated, and also present the evidence of strong error-correction effect in the short-rate equation, whereas the point estimate for the error-correction term is small and not statistical significance in the long-rate equation. Finally, Shanghai stock market ECT coefficient shows the evidence of long-term equilibrium in the first regime, while in the second regime the coefficient of correction term is larger than that of the first regime, indicating the rate convergence to long-term equilibrium is not uniform.

Keywords: Cointegration; Threshold vector error correction model; Cross-correlation; R/S method (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:18:p:4064-4074

DOI: 10.1016/j.physa.2013.04.050

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