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Policy Impact on the Chinese Stock Market: From the 1994 Bailout Policies to the 2015 Shanghai-Hong Kong Stock Connect

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  • Yang-Chao Wang

    (Newhuadu Business School, Minjiang University, Fuzhou 350108, China)

  • Jui-Jung Tsai

    (Newhuadu Business School, Minjiang University, Fuzhou 350108, China)

  • Qiaoqiao Li

    (Nottingham University Business School, Jubilee Campus, Nottingham NG8 1BB, UK)

Abstract

From the 1994 bailout policies to the 2015 Shanghai-Hong Kong Stock Connect, the policy impact on the Chinese stock market has changed over time. By May 2015, global investors can directly invest in a more legalized and normalized Chinese stock market, whereas they are still concerned about the policy-oriented market and its attendant risks. In this study, we employ the family of GARCH models to investigate the structural changes in risks with the implementation of a series of policies. Our results show that although many policies improve or stabilize the stock market, certain policies lead to substantial volatility. Among them, macro-control policies and transaction cost adjustments are a double-edged sword, which should be used with caution. Furthermore, with opening-up policies being launched recently, the Chinese stock market has entered a new stage in which it affects international capital markets. However, the increased risks, which may result in a sharp turnaround, cause worry.

Suggested Citation

  • Yang-Chao Wang & Jui-Jung Tsai & Qiaoqiao Li, 2017. "Policy Impact on the Chinese Stock Market: From the 1994 Bailout Policies to the 2015 Shanghai-Hong Kong Stock Connect," IJFS, MDPI, vol. 5(1), pages 1-19, January.
    • Handle: RePEc:gam:jijfss:v:5:y:2017:i:1:p:4-:d:88073
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    3. Shahzad, Farrukh, 2019. "Does weather influence investor behavior, stock returns, and volatility? Evidence from the Greater China region," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 525-543.
    4. Yi, Li & Liu, Zilan & He, Lei & Qin, Zilong & Gan, Shunli, 2018. "Do Chinese mutual funds time the market?," Pacific-Basin Finance Journal, Elsevier, vol. 47(C), pages 1-19.
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    6. Rob Kim Marjerison & Chungil Chae & Shitong Li, 2021. "Investor Activity in Chinese Financial Institutions: A Precursor to Economic Sustainability," Sustainability, MDPI, vol. 13(21), pages 1-17, November.
    7. Do, A. & Powell, R. & Yong, J. & Singh, A., 2020. "Time-varying asymmetric volatility spillover between global markets and China’s A, B and H-shares using EGARCH and DCC-EGARCH models," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).

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