IDEAS home Printed from https://ideas.repec.org/p/wyi/wpaper/002029.html
   My bibliography  Save this paper

Co-movements of Shanghai and New York Stock Prices by Time-varying Regressions

Author

Listed:
  • Gregory C Chow
  • Changjiang Liu
  • Linlin Niu

Abstract

We use time-varying regression to model the relationship between returns in the Shanghai and New York stock markets, with possible inclusion of lagged returns. The parameters of the regressions reveal that the effect of current stock return of New York on Shanghai steadily increases after the 1997 Asian financial crisis and turns significantly and persistently positive after 2002 when China entered WTO. The effect of current return of Shanghai on New York also becomes significantly positive and increasing after 2002. The upward trend has been interrupted during the recent global financial crisis, but reaches the level of about 0.4-0.5 in 2010 for both markets. Our results show that China’s stock market has become more and more integrated to the world market in the past twenty years with interruptions occurring during the recent global economic downturn.

Suggested Citation

  • Gregory C Chow & Changjiang Liu & Linlin Niu, 2013. "Co-movements of Shanghai and New York Stock Prices by Time-varying Regressions," Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  • Handle: RePEc:wyi:wpaper:002029
    as

    Download full text from publisher

    File URL: https://econpub.xmu.edu.cn/research/repec/upload/
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:lan:wpaper:2594 is not listed on IDEAS
    2. Ito, Takatoshi & Engle, Robert F. & Lin, Wen-Ling, 1992. "Where does the meteor shower come from? : The role of stochastic policy coordination," Journal of International Economics, Elsevier, vol. 32(3-4), pages 221-240, May.
    3. Groenwold, Nicolaas & Tang, Sam Hak Kan & Wu, Yanrui, 2004. "The dynamic interrelationships between the greater China share markets," China Economic Review, Elsevier, vol. 15(1), pages 45-62, January.
    4. Engle, Robert F & Ito, Takatoshi & Lin, Wen-Ling, 1990. "Meteor Showers or Heat Waves? Heteroskedastic Intra-daily Volatility in the Foreign Exchange Market," Econometrica, Econometric Society, vol. 58(3), pages 525-542, May.
    5. repec:lan:wpaper:2371 is not listed on IDEAS
    6. Shenqiu Zhang & Ivan Paya & David Peel, 2009. "Linkages between Shanghai and Hong Kong stock indices," Applied Financial Economics, Taylor & Francis Journals, vol. 19(23), pages 1847-1857.
    7. Gregory C. Chow & Caroline C. Lawler, 2003. "A Time Series Analysis of the Shanghai and New York Stock Price Indices," Annals of Economics and Finance, Society for AEF, vol. 4(1), pages 17-35, May.
    8. Hongquan Zhu & Zudi Lu & Shouyang Wang & Abdol S. Soofi, 2004. "Causal Linkages Among Shanghai, Shenzhen, And Hong Kong Stock Markets," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 135-149.
    9. repec:lan:wpaper:2452 is not listed on IDEAS
    10. Hong Li, 2007. "International linkages of the Chinese stock exchanges: a multivariate GARCH analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 17(4), pages 285-297.
    11. Ghosh, Asim & Saidi, Reza & Johnson, Keith H, 1999. "Who Moves the Asia-Pacific Stock Markets--US or Japan? Empirical Evidence Based on the Theory of Cointegration," The Financial Review, Eastern Finance Association, vol. 34(1), pages 159-170, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jan F. Kiviet & Zhenxi Chen, 2018. "A Critical Appraisal of Studies Analyzing Co-movement of International Stock Markets," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 151-196, May.
    2. Juan Carlos Cuestas & Bo Tang, 2015. "Exchange Rate Changes and Stock Returns in China: A Markov Switching SVAR Approach," Working Papers 2015024, The University of Sheffield, Department of Economics.
    3. Hong Cheng & Yunqing Wang & Yihong Wang & Tinggan Yang, 2022. "Inferring Causal Interactions in Financial Markets Using Conditional Granger Causality Based on Quantile Regression," Computational Economics, Springer;Society for Computational Economics, vol. 59(2), pages 719-748, February.
    4. repec:zbw:bofitp:2012_004 is not listed on IDEAS
    5. Babecký, Jan & Komárek, Lubos & Komárková, Zlatuse, 2012. "Integration of Chinese and Russian stock markets with world markets : National and sectoral Perspectives," BOFIT Discussion Papers 4/2012, Bank of Finland, Institute for Economies in Transition.
    6. Babecký, Jan & Komárek, Lubos & Komárková, Zlatuse, 2012. "Integration of Chinese and Russian stock markets with world markets: National and sectoral Perspectives," BOFIT Discussion Papers 4/2012, Bank of Finland Institute for Emerging Economies (BOFIT).
    7. Yifan Chen & Limin Yu & Jianhua Gang, 2021. "Half-day trading and spillovers," Frontiers of Business Research in China, Springer, vol. 15(1), pages 1-22, December.
    8. Zhenxi CHEN & Jan F. KIVIET & Weihong Huang, 2014. "Hong Kong: A Bridge Connecting Mainland China and the International Market," Economic Growth Centre Working Paper Series 1406, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    9. Kiviet Jan F., 2017. "Discriminating between (in)valid External Instruments and (in)valid Exclusion Restrictions," Journal of Econometric Methods, De Gruyter, vol. 6(1), pages 1-9, January.
    10. Luke Lin & Wen-Yuan Lin, 2018. "Does the major market influence transfer? Alternative effect on Asian stock markets," Review of Quantitative Finance and Accounting, Springer, vol. 50(4), pages 1169-1200, May.
    11. Abdou, Hussein A. & Elamer, Ahmed A. & Abedin, Mohammad Zoynul & Ibrahim, Bassam A., 2024. "The impact of oil and global markets on Saudi stock market predictability: A machine learning approach," Energy Economics, Elsevier, vol. 132(C).
    12. Zhenxi Chen & Jan F. Kiviet & Weihong Huang, 2015. "On the integration of China's main stock exchange with the international financial market," Economic Growth Centre Working Paper Series 1505, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    13. Hou, Yang & Li, Steven, 2016. "Information transmission between U.S. and China index futures markets: An asymmetric DCC GARCH approach," Economic Modelling, Elsevier, vol. 52(PB), pages 884-897.
    14. Ming Lin & Changjiang Liu & Linlin Niu, 2013. "Bayesian Estimation of Wishart Autoregressive Stochastic Volatility Model," Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    15. Jan F. Kiviet & Zhenxi Chen, 2016. "A critical appraisal of studies analyzing co-movement of international stock markets with a focus on East-Asian indices," Economic Growth Centre Working Paper Series 1606, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    16. Geeta Duppati & Yang (Greg) Hou & Frank Scrimgeour, 2017. "The dynamics of price discovery for cross-listed stocks evidence from US and Chinese markets," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1389675-138, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:wyi:journl:002146 is not listed on IDEAS
    2. Jan F. Kiviet & Zhenxi Chen, 2018. "A Critical Appraisal of Studies Analyzing Co-movement of International Stock Markets," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 151-196, May.
    3. Chow, Gregory C. & Liu, Changjiang & Niu, Linlin, 2011. "Co-movements of Shanghai and New York stock prices by time-varying regressions," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 577-583.
    4. repec:zbw:bofitp:2011_016 is not listed on IDEAS
    5. Kiviet Jan F., 2017. "Discriminating between (in)valid External Instruments and (in)valid Exclusion Restrictions," Journal of Econometric Methods, De Gruyter, vol. 6(1), pages 1-9, January.
    6. Jan F. Kiviet & Zhenxi Chen, 2016. "A critical appraisal of studies analyzing co-movement of international stock markets with a focus on East-Asian indices," Economic Growth Centre Working Paper Series 1606, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    7. Luke Lin & Wen-Yuan Lin, 2018. "Does the major market influence transfer? Alternative effect on Asian stock markets," Review of Quantitative Finance and Accounting, Springer, vol. 50(4), pages 1169-1200, May.
    8. Zhou, Xinmiao & Qian, Huanhuan & Pérez-Rodríguez, Jorge. V. & González López-Valcárcel, Beatriz, 2020. "Risk dependence and cointegration between pharmaceutical stock markets: The case of China and the USA," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    9. Jin, Xiaoye, 2015. "Volatility transmission and volatility impulse response functions among the Greater China stock markets," Journal of Asian Economics, Elsevier, vol. 39(C), pages 43-58.
    10. Johansson, Anders C. & Ljungwall, Christer, 2009. "Spillover Effects Among the Greater China Stock Markets," World Development, Elsevier, vol. 37(4), pages 839-851, April.
    11. Li, Johnny Siu-Hang & Ng, Andrew C.Y. & Chan, Wai-Sum, 2015. "Managing financial risk in Chinese stock markets: Option pricing and modeling under a multivariate threshold autoregression," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 217-230.
    12. Sunil S. Poshakwale & Anandadeep Mandal, 2017. "Sources of time varying return comovements during different economic regimes: evidence from the emerging Indian equity market," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 859-892, May.
    13. Thomas C. Chiang & Lanjun Lao & Qingfeng Xue, 2016. "Comovements between Chinese and global stock markets: evidence from aggregate and sectoral data," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1003-1042, November.
    14. Bubák, Vít & Kocenda, Evzen & Zikes, Filip, 2011. "Volatility transmission in emerging European foreign exchange markets," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2829-2841, November.
    15. Wen-Ling Lin & Takatoshi Ito, 1994. "Price Volatility and Volume Spillovers between the Tokyo and New York Stock Markets," NBER Chapters, in: The Internationalization of Equity Markets, pages 309-343, National Bureau of Economic Research, Inc.
    16. David McMillan & Isabel Ruiz & Alan Speight, 2010. "Correlations and spillovers among three euro rates: evidence using realised variance," The European Journal of Finance, Taylor & Francis Journals, vol. 16(8), pages 753-767.
    17. Michael Melvin & Bettina Peiers, 1998. "Twice a day or continuously? Observation frequency and inference on foreign exchange volatility persistence," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(1), pages 44-53, March.
    18. Hyde, Stuart J & Bredin, Don P & Nguyen, Nghia, 2007. "Correlation dynamics between Asia-Pacific, EU and US stock returns," MPRA Paper 9681, University Library of Munich, Germany.
    19. Knif, Johan & Pynnonen, Seppo, 1999. "Local and global price memory of international stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(2), pages 129-147, April.
    20. repec:uts:finphd:39 is not listed on IDEAS
    21. Ibrahim, Boulis Maher & Brzeszczynski, Janusz, 2009. "Inter-regional and region-specific transmission of international stock market returns: The role of foreign information," Journal of International Money and Finance, Elsevier, vol. 28(2), pages 322-343, March.
    22. Joseph Friedman & Yochanan Shachmurove, "undated". "Using Vector Autoregression Models to Analyze the Behavior of the European Community Stock Markets," Penn CARESS Working Papers 6c418113c19a91c029047e102, Penn Economics Department.
    23. Inagaki, Kazuyuki, 2007. "Testing for volatility spillover between the British pound and the euro," Research in International Business and Finance, Elsevier, vol. 21(2), pages 161-174, June.

    More about this item

    Keywords

    China; Globalization; Rate of Return; Stock Markets; Time-varying parameter regression.;
    All these keywords.

    JEL classification:

    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wyi:wpaper:002029. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WISE Technical Team (email available below). General contact details of provider: https://www.wise.xmu.edu.cn/english/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.