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Do stock price bubbles correlate between China and Pakistan? An inquiry of pre‐ and post‐Chinese investment in Pakistani capital market under China‐Pakistan Economic Corridor regime

Ayesha Liaqat, Mian Sajid Nazir, Iftikhar Ahmad, Hammad Hassan Mirza and Farooq Anwar

International Journal of Finance & Economics, 2020, vol. 25, issue 3, 323-335

Abstract: This paper examines the existence and coincidence of pre‐ and‐post stock price multiple bubbles in Chines and Pakistani capital markets under China Pakistan Economic Corridor regime using generalized supremum augmented Dickey–Fuller (GSADF) test with weekly closing prices for the period 2013–2018 for different market indices of Pakistan Stock Exchange (PSX), Shanghai Stock Exchange, and Shenzhen Stock Exchange. Empirical results depict that multiple stock bubbles exist in PSX at the end of 2016 and as well as in Chinese stock markets in the mid of 2014–2015 and these stock price bubbles are correlated between Pakistan and China. The present study is expected to be pioneer in its nature to apply GSADF for the identification of multiple stock bubbles in emerging stock markets of Pakistan and China which can be further used for comparison of stock bubbles in other regional markets such as BRICS or SAARC regions.

Date: 2020
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International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

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