| ID | 086583 |
| Title Proper | Chinese and world equity markets |
| Other Title Information | review of the volatilities and correlations in the first fifteen years |
| Language | ENG |
| Author | Lin, Kuan-Pin ; Menkveld, Albert J ; Yang, Zhishu |
| Publication | 2009. |
| Summary / Abstract (Note) | After more than 15 years of Chinese equity markets, we study how variance, covariance, and correlations have developed in these markets relative to world markets, based on the dynamic conditional correlation (DCC) model of Engle [Engle, R., 2002. A dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business & Economic Statistics 20(3), 339-350.]. Chinese markets offer A-shares to domestic investors and otherwise identical B-shares to foreign investors. We find that the volatility of A-shares has declined over the past decade. We find no asymmetric volatility relative to world markets in China. Contrary to the global trend of increasing cross-country correlations, we find stationary correlations for China. A-share indices have never been correlated with world markets, and B-share indices exhibit a low degree of correlation with Western markets (0-5%) and a slightly higher degree of correlation with other Asian markets (10-20%). We interpret these findings using Gordon's growth model. |
| `In' analytical Note | China Economic Review Vol. 20, No. 1; Mar 2009: p.29-45 |
| Journal Source | China Economic Review Vol. 20, No. 1; Mar 2009: p.29-45 |
| Key Words | China ; World Equity Markets ; Dynamic Conditional Correlation ; Volatility ; Gordon's Growth Model |