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Relative development in stock markets: empirical evidence from mainland China and Hong Kong

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  • Dauvin Peterson
  • Scott Pardee
  • Phanindra Wunnava

Abstract

Factors that might explain the relative growth of the stock markets of Hong Kong and Mainland China in recent years and the different responses of these markets to the 1997 Asian financial and economic crisis are empirically analysed. These factors are used to project the growth of total market capitalization of the two markets in the future. Clearly, Hong Kong, with its open economy and financial markets, was strongly affected by the Asian crisis, whereas Mainland China, with many restrictions on capital flows still in place, was less affected. The results indicate that the Mainland Chinese stock market is still developing, and forecast models suggest that Mainland China's market will overtake Hong Kong's market in size, but may become the more volatile of the two markets, especially as China relaxes its restrictions on international capital flows.

Suggested Citation

  • Dauvin Peterson & Scott Pardee & Phanindra Wunnava, 2003. "Relative development in stock markets: empirical evidence from mainland China and Hong Kong," Applied Financial Economics, Taylor & Francis Journals, vol. 13(4), pages 309-316.
    • Handle: RePEc:taf:apfiec:v:13:y:2003:i:4:p:309-316
    DOI: 10.1080/09603100210139401
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    References listed on IDEAS

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    1. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    2. Hali J. Edison & John G. Fernald & Prakash Loungani, 1998. "Was China the first domino? assessing links between China and the rest of emerging Asia," International Finance Discussion Papers 604, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Paul McGuinness & Michael Ferguson, 2005. "The ownership structure of listed Chinese State-owned enterprises and its relation to corporate performance," Applied Financial Economics, Taylor & Francis Journals, vol. 15(4), pages 231-246.

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