The effects of domestic and international news and volatility on integration of Chinese stock markets with international stock markets

This paper provides a comprehensive and up-to-date analysis of time-varying return co-movements between Chinese stock markets and stock markets in the USA, UK, France and Japan by employing smooth transition conditional correlation (STCC-GARCH) and double smooth transition conditional correlation (D...

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Bibliographic Details
Published in:Empirical economics 2016-03, Vol.50 (2), p.317-360
Main Authors: Öztek, Mehmet Fatih, Öcal, Nadir
Format: Article
Language:English
Subjects:
Currency
Econometrics
Economic growth
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Finance
Industrialized nations
Institutional investments
Insurance
International finance
Investors
Management
New stock market listings
Portfolio diversification
Prices
Renminbi
Securities markets
Statistics for Business
Stochastic models
Stock exchanges
Studies
Trends
Volatility
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Summary:This paper provides a comprehensive and up-to-date analysis of time-varying return co-movements between Chinese stock markets and stock markets in the USA, UK, France and Japan by employing smooth transition conditional correlation (STCC-GARCH) and double smooth transition conditional correlation (DSTCC-GARCH) models with specific emphasis on the role of domestic and international news and volatility. Unlike earlier literature, we reveal that there are noticeable rising trends in conditional correlations among these markets particularly following the financial reforms in China. Moreover, the empirical results of DSTCC-GARCH specifications with time and various volatility measures generally indicate that the correlations increase, not only over time but also during calm periods, suggesting that Chinese stock markets may be safe harbors during global financial crisis.
ISSN:0377-7332
1435-8921
DOI:10.1007/s00181-015-0943-x