Co-Movements of Shanghai and New York Stock Prices by Time-Varying Regressions

20 Pages Posted: 22 Aug 2011

See all articles by Gregory C. Chow

Gregory C. Chow

Princeton University - Department of Economics

Liu Changjiang

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE); Xiamen University

Linlin Niu

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE); Xiamen University - School of Economics

Date Written: June 20, 2011

Abstract

We estimate a time-varying regression model to study 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 the current stock return for New York on that for Shanghai steadily increases after the 1997 Asian financial crisis and turns significantly and persistently positive after 2002, when China entered WTO. The effect of the current return for 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 to 0.5 in 2010 for both markets. Our results show that China’s stock market has become more and more integrated into the world market in the past twenty years, with interruptions occurring during the recent global economic downturn.

Keywords: China, globalization, rate of return, stock markets, time-varying parameter regression

Suggested Citation

Chow, Gregory C. and Changjiang, Liu and Niu, Linlin, Co-Movements of Shanghai and New York Stock Prices by Time-Varying Regressions (June 20, 2011). BOFIT Discussion Paper No. 16/2011, Available at SSRN: https://ssrn.com/abstract=1914289 or http://dx.doi.org/10.2139/ssrn.1914289

Gregory C. Chow (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Liu Changjiang

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 361005
China

Xiamen University ( email )

Xiamen, Fujian 361005
China

Linlin Niu

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 306, Economics Building
Xiamen, Fujian 361005
China

Xiamen University - School of Economics ( email )

China

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