1. Empirical analysis of dynamic correlations of stock returns: evidence from Chinese A-share and B-share markets.
- Author
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Chiang, Thomas C., Tan, Lin, and Li, Huimin
- Subjects
STOCKS (Finance) ,STOCK exchanges ,PRICING ,INVESTMENTS ,INVESTORS ,PRICES ,BUSINESS enterprises ,ECONOMIC conditions in Asia - Abstract
This paper examines the dynamic correlation structure between A-share and B-share stock returns based on three different measures of correlation coefficients. Testing the models by employing daily stock-return data for the period from 1996 through 2003, we reach the following empirical conclusions. First, the correlation coefficients between A-share and B-share stock returns are time varying. Second, the dynamic path of the correlation coefficients indicates that the correlation coefficients are significantly correlated with the trend factor. Third, there is a substantial spillover effect from the Asian crisis to Chinese stock-return dynamic correlations. Fourth, the evidence suggests that the time-varying correlations are significantly associated with excessive trading activity as measured by excessive trading volumes and high-low price differentials. Fifth, the correlation between A-share and B-share markets has increased since the relaxation of the restriction on B-share market investments by domestic investors. [ABSTRACT FROM AUTHOR]
- Published
- 2007
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