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Co-movement dynamics of US and Chinese stock market: evidence from COVID-19 crisis

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  • Ge Song
  • Zhiqing Xia
  • Muhammad Farhan Basheer
  • Syed Mehmood Ali Shah

Abstract

This paper aims to examine the co-movement between the two economic powers, namely the USA and China. The authors are mainly interested in examining the dynamics of co-movements during, and in the pre-covid periods. Additionally, they have aimed to examine the volatility spillover between USA and China, during and in the pre-covid periods. In order to achieve the research-based objectives, advanced econometrics models have been applied to the data from July1, 2010, to April 30, 2021. The results show that the sample market is integrated in the long run. The results also indicate that the behaviour of the Chinese market is same as the US market, and offers negligible opportunities for investors for diversification during this time. The findings indicate that the Ganger Causality between the stock markets during crisis is significantly higher than the pre-crisis period. The results of EGARCH model confirm the presence of asymmetric volatility spillover effects between the US and Chinese markets, during the considered time periods. This study also examines the co-movement in China, grounded upon the robust approach that facilitates examining the dependence structure between the sample variables. The findings offer valuable understanding for investors who are looking for investment diversification opportunities worldwide.

Suggested Citation

  • Ge Song & Zhiqing Xia & Muhammad Farhan Basheer & Syed Mehmood Ali Shah, 2022. "Co-movement dynamics of US and Chinese stock market: evidence from COVID-19 crisis," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 2460-2476, December.
    • Handle: RePEc:taf:reroxx:v:35:y:2022:i:1:p:2460-2476
    DOI: 10.1080/1331677X.2021.1957971
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    Cited by:

    1. Dr. Muhammad Rizwan Kamran & Lubna Nasar & Saima Khurshid & Aisha Saleem, 2023. "Valuing Integration In Asian Stock Markets: A Comparative Study Of Pre And Post-Covid-19 Periods," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(2), pages 126-132.
    2. Liu, Qiming & Liu, Zhenya & Moussa, Faten & Mu, Yuhao, 2024. "International capital flow in a period of high inflation: The case of China," Research in International Business and Finance, Elsevier, vol. 67(PB).

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