Dependence Structure between China’s Stock Market and Other Major Stock Markets before and after the 2008 Financial Crisis

Hao Ji, Hao Wang, Jia Xu and Brunero Liseo

Emerging Markets Finance and Trade, 2020, vol. 56, issue 11, 2608-2624

Abstract: To investigate changes in the dependence structure between China’s stock market and other important international stock markets as a result of the 2008 global financial crisis, the ARMA-GARCH skewed-t Vine Copula method is used and an empirical study is undertaken using daily closing prices for seven key international stock markets from 4 January 2002 to 29 December 2017. The results indicate that the CAC and the HSI are the key indices connecting all the other indices in Europe and Asia, respectively. In addition, the financial crisis resulted in significant changes to the dependence structure, and the FTSE has gradually become more important in connecting European stock markets with Asian markets. Moreover, Tree 2 of the Vine Copula shows that the entire high-dimensional dependence structure has been modified by the crisis, and the indices are now more correlated than they were before the crisis.

Date: 2020
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DOI: 10.1080/1540496X.2019.1615434

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