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The Effectiveness of Regulatory Policy Changes on the Volatility Dynamics of the Chinese Stock Markets

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  • Haiwei Chen
  • James Chong
  • Changjiang Lu
  • Kemin Wang

Abstract

We investigate the effectiveness of two recent regulatory policy changes on the volatility dynamics of the Chinese A- and B-share markets. The opening of the B-share market to domestic Chinese investors significantly increases the dynamic conditional correlation between the two markets. Results from the GJR (Glosten, Jagannathan, and Runkle) model with dummy variables and the Markov switching model of Hamilton (1994) indicate a shift to a low-volatility regime in the B-share market. However, the subsequent opening of the A-share market to foreign investors has no measurable effect on volatility.

Suggested Citation

  • Haiwei Chen & James Chong & Changjiang Lu & Kemin Wang, 2008. "The Effectiveness of Regulatory Policy Changes on the Volatility Dynamics of the Chinese Stock Markets," Chinese Economy, Taylor & Francis Journals, vol. 41(2), pages 5-23, March.
    • Handle: RePEc:mes:chinec:v:41:y:2008:i:2:p:5-23
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    Citations

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    Cited by:

    1. Cai, Charlie X. & McGuinness, Paul B. & Zhang, Qi, 2011. "The pricing dynamics of cross-listed securities: The case of Chinese A- and H-shares," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2123-2136, August.
    2. 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.
    3. Niklas Ahlgren & Bo Sjo & Jianhua Zhang, 2009. "Panel cointegration of Chinese A and B shares," Applied Financial Economics, Taylor & Francis Journals, vol. 19(23), pages 1859-1871.

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