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A continuous wavelets approach of China opening reforms effects on relationships between mainland Chinese stock exchanges and Hong Kong

Author

Listed:
  • Yang Mestre Zhou

    (MRE, University of Montpellier)

  • Roman Mestre

    (MRE, University of Montpellier)

Abstract

This paper analyses the relationships between the Chinese mainland markets (Shanghai and Shenzhen) and Hong Kong market considering the important reforms periods from 2001 to 2005 with the Non-Tradable Share reform. We use standards econometrics methods of causality and cointegration and the wavelets coherence and phase methods on daily Chinese stock markets prices from 1993 to 2017. By using the causality test and co-integration analysis, we find that the NTS reform modifies the linkages between three markets. SSE becomes the leader of the Chinese markets. The wavelets allow to analyse time-frequency correlation and Instantaneous Time Lag interaction between pairwise variables. Results confirm that the opening reforms increased the level of correlation both in long and short run between mainland market and Hong Kong. In addition, the influence of mainland markets on Hong Kong is increasing but Hong Kong still strongly affects them especially during crisis time and at long run. The wavelets approach finally highlight those relationships between Chinese markets are multidimensional and dependent to the horizon of study.

Suggested Citation

  • Yang Mestre Zhou & Roman Mestre, 2024. "A continuous wavelets approach of China opening reforms effects on relationships between mainland Chinese stock exchanges and Hong Kong," Economics Bulletin, AccessEcon, vol. 44(1), pages 430-465.
    • Handle: RePEc:ebl:ecbull:eb-21-00816
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    China opening reforms; Chinese stock markets; Continuous wavelets coherence and phase; instantaneous time lag;
    All these keywords.

    JEL classification:

    • Y1 - Miscellaneous Categories - - Data: Tables and Charts
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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