Factors Influencing Equity Return Correlations between China¡¯s Pairs of A- and B-Share Markets: Effect of QFII¡¯s Implementation

Jung-Lieh Hsiao, Teng-Tsai Tu and Mei-Chun Chen

International Journal of Financial Research, 2017, vol. 8, issue 2, 105-123

Abstract: This paper was intended to examine factors influencing the correlations between A- and B-shares of individual firms, and explore the effects of Qualified Foreign Institutional Investor¡¯s (QFII) implementation on correlations. The empirical results show that interest rate differential, relative turnover rate, relative return volatility, and market sentiment had impacts on correlation both before and after the QFII¡¯s implementation. After its implementation, correlations became more sensitive to premium, relative turnover rate and market sentiment. Furthermore, the estimated constant term for overall market correlation became more negative (raw values from -0.3413 to -0.8815), indicating an increasing correlation between A- and B-shares¡¯ returns. The policy implications are that much benefit of diversification into emerging markets such as paired A-and B-shares can be accomplished, together with taking several influential factors into account.

Keywords: QFII; premium; relative turnover rate; market sentiment; Paired A-and B-shares (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciedu.ca/journal/index.php/ijfr/article/view/11349/6962 (application/pdf)
http://www.sciedu.ca/journal/index.php/ijfr/article/view/11349 (text/html)

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:jfr:ijfr11:v:8:y:2017:i:2:p:105-123

DOI: 10.5430/ijfr.v8n2p105

Access Statistics for this article

International Journal of Financial Research is currently edited by Gina Perry

More articles in International Journal of Financial Research from International Journal of Financial Research, Sciedu Press
Bibliographic data for series maintained by Gina Perry ().