Tian, Gary G., 2007, Are Chinese stock markets increasing integration with other markets in the Greater China Region and other major markets?, Australian Economic Papers, 46(3), 240-253.
This paper investigates the cointegrating and long-term causal relationships between the Shanghai A and B-share market, and between these two markets and the Hong Kong, the Taiwanese, the Japanese and the US market of two sub periods between July 1993 and March 2007. On the basis of a new Granger noncausality test procedure developed by Toda-Yamamoto (1995) and Johansen’s (1988) cointegration test, my results suggest that a long-term equilibrium relationship measured by cointegration has been merged between the Chinese A-share market and the other markets in greater China region as well as the US market during the post-crisis period which covers the period since Chinese A-share market was opened to the Qualified Foreign Institutional Investors (QFII) in 2002. I also found that the Shanghai A-share market uni-directionally Granger-causes the other regional markets after the Asian financial crisis, while the A-share market and Hong Kong H-share market have had a significant feedback relationship since then. However, I found no evidence there has been cointegrating relationship between Shanghai B-share market and any other market ever since the B-share market was opened to the local retail investors in 2001.