Document Type
Journal Article
RIS ID
23546
Citation
Tian, Gary Gang, 2008, Equity market price interactions between China and the other markets within the Chinese states equity markets, Multinational Finance Journal, 12(1/2), 105-126.
http://ro.uow.edu.au/era/530
Abstract
This study examines the cointegrating and long-term causal relationships of equity market prices in equity markets of Chinese states namely, Shanghai, Shenzhen, Hong Kong, Taiwan and Singapore. I cover the period between October 5. 1992 and March 20. 2006, taking into account both the Asian financial crisis and the opening-up of China's equity markets in recent years. First, I analyse the cointegration by utilizing Johansen's (1988) cointegration tests. I find that a long-term equilibrium relalionship measured by cointegration has been established among Shanghai, Shenzhen, Hong Kong and Taiwanese markets and, to a lesser degree, between these markets and the Singapore market since 1998. Secondly, this study examines causality by exploring the bootstrapped Toda-Yamamoto non-causality tests. I find that there is strong evidence of a bi-directional causality between Shanghai and Shenzhen markets after 1998. Furthermore, I also find that there are more causal linkages between the Chinese states equity markets: two mainland Chinese markets, Hong Kong, Taiwan, and Singapore became more dependent on each other. The robustness of the above findings is confirmed by the use of a bootstrap test employed to test the validity of my results.