Abstract

This paper investigates what types of mutual relationships exist among the stock markets of the Greater China economic bloc, which include stock markets in Hong Kong and Taiwan, as well as stock markets in Shanghai and Shenzhen. Using the unit root test, co-integration analysis, and vector error correction model (VECM), this paper analyzes interrelationships among daily stock indices for the period from the beginning of 1992 to the end of 2001. Test results indicate the existence of one co-integrating vector, implying that a long-run equilibrium relationship holds among the four stock indices. Variance decomposition of forecast errors provides evidence that the Shenzhen stock market is the market most heavily influenced by the unexpected variations of other markets in the Greater China economic bloc.

주제어

#vector error correction model (VECM)   #the Greater China economic bloc   #stock market inter-dependence   #variance decomposition of forecast errors   #impulse response function  

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