COMMON FEATURES IN EAST ASIAN STOCK MARKETS: LONG-TERM AND SHORT-TERM COMOVEMENTS BETWEEN CHINA AND KOREA

Hahn Lee () and Soo In Kim ()
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Soo In Kim: Department of Economics, Sogang University, CPO Box 1142, Seoul 172-742, Korea

The Singapore Economic Review (SER), 2013, vol. 58, issue 03, 1-22

Abstract: As increasing attention has been given in recent literature to the potential of the Chinese financial market, we investigate the strength of shared dynamics among East Asian stock markets, by examining both the long-term and short-term comovements. In doing so, the cointegration analysis is used to assess the long-term relationship, whereas the notions of cofeature as well as contemporaneous correlation are employed to discuss the short-term relationship. The basic finding is that evidence for short-term comovement between the Korean and Chinese stock markets appears to be strong, while evidence for long-term relationship is rather weak. Empirical results from subsamples suggest that both the long-term and short-term relationships have strengthened since the acquisition of QFII qualification by Korean financial firms. These observations indicate that the international linkage between the two countries has strengthened along with increasing opportunities for international investment in the Chinese stock market.

Keywords: Cofeature; cointegration; comovement; QDII; QFII; G15; C22; C32 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1142/S0217590813500185

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