Asymmetric Dynamic Interrelationships among the Greater Chinese, Japanese and US Stock Markets

Abstract

Over the past decade, empirical studies have not found any evidence of cointegration relationships between the A-shares in the Shanghai/Shenzhen markets and the other indexes in foreign markets. However, by performing an asymmetric cointegration test, we surprisingly find a strong long-run asymmetric cointegration relationship linking A-shares in the Shanghai/Shenzhen markets with either the Hang Seng index or the Taiwan index, thereby confirming the concept of a Greater Chinese stock market. On the other hand, we find an insignificant long-run asymmetric cointegration relationship between the S & P500/Nikkei 225 and the A-shares in the Shanghai/Shenzhen markets. The asymmetric dynamic inter-relationships can provide an interesting point of view.