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Common Features In East Asian Stock Markets: Long-Term And Short-Term Comovements Between China And Korea

Author

Listed:
  • HAHN SHIK LEE

    (Department of Economics, Sogang University, CPO Box 1142, Seoul 172-742, Korea)

  • SOO IN KIM

    (Department of Economics, Sogang University, CPO Box 1142, Seoul 172-742, Korea)

Abstract

As increasing attention has been given in recent literature to the potential of the Chinese financial market, we investigate the strength of shared dynamics among East Asian stock markets, by examining both the long-term and short-term comovements. In doing so, the cointegration analysis is used to assess the long-term relationship, whereas the notions of cofeature as well as contemporaneous correlation are employed to discuss the short-term relationship. The basic finding is that evidence for short-term comovement between the Korean and Chinese stock markets appears to be strong, while evidence for long-term relationship is rather weak. Empirical results from subsamples suggest that both the long-term and short-term relationships have strengthened since the acquisition of QFII qualification by Korean financial firms. These observations indicate that the international linkage between the two countries has strengthened along with increasing opportunities for international investment in the Chinese stock market.

Suggested Citation

  • Hahn Shik Lee & Soo In Kim, 2013. "Common Features In East Asian Stock Markets: Long-Term And Short-Term Comovements Between China And Korea," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 58(03), pages 1-22.
    • Handle: RePEc:wsi:serxxx:v:58:y:2013:i:03:n:s0217590813500185
    DOI: 10.1142/S0217590813500185
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    References listed on IDEAS

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    1. Geert Bekaert & Michael Ehrmann & Marcel Fratzscher & Arnaud Mehl, 2014. "The Global Crisis and Equity Market Contagion," Journal of Finance, American Finance Association, vol. 69(6), pages 2597-2649, December.
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    More about this item

    Keywords

    Cofeature; cointegration; comovement; QDII; QFII; G15; C22; C32;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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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