Volatility spillovers of A- and B-shares for the Chinese stock market and its impact on the Chinese index returns

Abstract

This paper investigates the net directional and total volatility spillovers of A- and B-shares in the Chinese stock market. Using the framework proposed by Diebold and Yilmaz (2012, 2014), our empirical results show a net exporter of volatility associated with uncertainty shocks from A-shares to B-shares. Moreover, the uncertainty indices measured by the total volatility spillover index and the global volatility index exert a nonlinear effect on subsequent Chinese stock index returns. Finally, our findings indicate that for explaining Chinese stock index returns, the total volatility spillover index provides more useful information than the global volatility index.