Impacts of Economic Integration on Stock Market Dependence Without Jump Effects

Chung-Chu Chuang, Jeff T. C. Lee and Chih-Chiang Wu

Emerging Markets Finance and Trade, 2018, vol. 54, issue 1, 132-143

Abstract: This article investigates the impacts of the Closer Economic Partnership Arrangement (CEPA) on stock market dependence between Hong Kong and China. To avoid the influence of unusual events on stock market dependence, the mixed generalized autoregressive conditional heteroscedastic with the autoregressive jump intensity (GARJI) margin model was modified to exclude jump innovations. The t copula was chosen to estimate the unknown dependence break and measure the average dependence level change. The stock market dependence break occurred about one and a half years after CEPA became effective, and the CEPA increased stock market dependence between Hong Kong and China. Moreover, this article shows the influence of stock market jump effects in the case of CEPA.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:54:y:2018:i:1:p:132-143

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DOI: 10.1080/1540496X.2016.1244510

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