Abstract
We empirically investigate the Granger causality between northbound SH-HK Connect and domestic market behavior using a newly proposed sequential multiple-horizon non-causation test strategy. Empirical results illustrate that the northbound SH-HK Connect only cause onshore market change in very few windows, which means that foreign investors do not better seize the moment of buying and selling than domestic investors. Given the low proportion of the Qualified Foreign Institutional Investors (QFII) and the northbound Stock Connect quotas in aggregate free float A-share market cap and much lower turnover velocity than individual A-share investors, domestic investors would remain a dominant marginal price setter in the onshore market until foreign ownership reaches more meaningful levels.
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