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Stock market correlations between China and its emerging market neighbors

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  • Jayasuriya, Shamila A.

Abstract

We examine interlinkages of stock return behavior for China and three emerging market neighbors from the Asia Pacific region from November 1993 to July 2008. Results are based on a VAR model. Impulse responses and vector decomposition of VAR are also utilized. Evidence suggests that the aggregate markets are mostly not interrelated. However, we observe relations between China and the other markets when foreign investor returns are specifically accounted for. In addition, a shock originating in China is significantly felt in the other equity markets. Stock market characteristics and macroeconomic conditions of these countries may help explain the observed relations.

Suggested Citation

  • Jayasuriya, Shamila A., 2011. "Stock market correlations between China and its emerging market neighbors," Emerging Markets Review, Elsevier, vol. 12(4), pages 418-431.
    • Handle: RePEc:eee:ememar:v:12:y:2011:i:4:p:418-431
    DOI: 10.1016/j.ememar.2011.06.005
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    More about this item

    Keywords

    Stock market returns; Market correlations; Emerging market economies; Vector autoregression (VAR); Impulse response functions; Vector decomposition; Stock market characteristics;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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