Dynamic Interactions Among Macroeconomic Variables and Stock Indexes in Taiwan, Hong Kong, and China

Syouching Lai, Teng Yuan Cheng, Hung Chih Li and Sheng-Peng Chien

Emerging Markets Finance and Trade, 2013, vol. 49, issue S4, 213-235

Abstract: This study analyzes dynamic interactions among macroeconomic variables and the stock markets of Taiwan, Hong Kong, and China by incorporating the long-term and short-term comovements, which can shed some light on the long-term and short-term market efficiency/inefficiency in the region. The number of common cycles is investigated in these markets and each stock index series is decomposed into its trend and cyclical components. The authors observe that foreign stock markets have greater influence on the domestic market than domestic macroeconomic variables do. This implies that policymakers need to consider not only macroeconomic variables but also the effects of markets on one another when markets are integrated.

Keywords: common cycle; comovement; cyclical; dynamic interactions; macroeconomic variables; trend (search for similar items in EconPapers)
Date: 2013
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