An explanation of the volatility disparity between the domestic and foreign shares in the Chinese stock markets

He, Yan; Wu, Chunchi; Chen, Yea-Mow

doi:10.1016/s1059-0560(03)00003-0

Cited by 14 publications

(5 citation statements)

References 18 publications

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“…Then, the differences in the market-making costs between the two markets could also be another possible cause of the volatility disparity. The B-share markets in China are found to contain higher informed trading and other market-making costs than the A-share markets (He et al, 2003). When informed trading and other cost components are accounted for, the volatility disparity between the A-and B-shares decreases.…”

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confidence: 90%

Dynamic Linkages among Financial Markets in the Greater China Region: A Multivariate Asymmetric Approach

Zhang

2012

World Economy

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This study examines the volatility dynamics of the Greater China stock markets by employing a multivariate framework that incorporates the features of asymmetries, persistence and time-varying correlations. The multivariate framework with these features will contribute to a better understanding of the interdependence and integration among the stock markets in the Greater China region. Our results confirm the existence of volatility persistence and asymmetries, and there is some evidence of a common degree of persistence (\u27co-persistence\u27) among the markets. It is also found that the Mainland Chinese markets are actually less volatile than the Taiwan and Hong Kong stock exchanges in the late 1990s and early 2000s. The Shenzhen and Shanghai stock exchanges are positively (not perfectly) correlated with each other, but they show a weaker correlation with the Hong Kong and Taiwan markets. These findings have important implications for hedging and portfolio management

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confidence: 90%

Dynamic Linkages among Financial Markets in the Greater China Region: A Multivariate Asymmetric Approach

Zhang

2012

World Economy

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“…Cappiello et al (2006) showed that stocks' return volatilities and correlations move together, while Knif and Pynnönen (2007) reported supporting findings that high volatility tends to increase correlations between markets. He, et al (2003) documented that high volatility disparity between B-and A-share returns was mainly attributed to informed trading cost and when accounting for informed trading as well as other component costs, the volatility disparity disappeared. The implementation of the QFII program may gradually reduce the trading cost difference between the A-and B-share, which might in turn increase the cross correlations.…”

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confidence: 99%

Factors Influencing Equity Return Correlations between China’s Pairs of A- and B-Share Markets: Effect of QFII’s Implementation

Hsiao¹,

Tu²,

Chen³

2017

IJFR

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This paper was intended to examine factors influencing the correlations between A-and B-shares of individual firms, and explore the effects of Qualified Foreign Institutional Investor's (QFII) implementation on correlations. The empirical results show that interest rate differential, relative turnover rate, relative return volatility, and market sentiment had impacts on correlation both before and after the QFII's implementation. After its implementation, correlations became more sensitive to premium, relative turnover rate and market sentiment. Furthermore, the estimated constant term for overall market correlation became more negative (raw values from -0.3413 to -0.8815), indicating an increasing correlation between A-and B-shares' returns. The policy implications are that much benefit of diversification into emerging markets such as paired A-and B-shares can be accomplished, together with taking several influential factors into account.

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“…Second, the differences in the market-making costs between the two markets could be another possible cause of volatility disparity. Additionally, other reasons like different informed trading and other market-making costs in A-and B-share markets (He et al [2003]), the speculation of mergers between them and changes in market supervision in the B-share markets since 2000 (Ho and Zhang [2012]) can also help to explain those differences.…”

Section: E X H I B I Tmentioning

confidence: 99%

Volatility and Correlation Dynamics of the MainlandChinese and Hong Kong Stock Markets: Evidence from the A-, B-, H- and Red Chip Markets

Ho¹,

Shi²,

Zhang³

2014

JWM

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An explanation of the volatility disparity between the domestic and foreign shares in the Chinese stock markets

Cited by 14 publications

References 18 publications

Dynamic Linkages among Financial Markets in the Greater China Region: A Multivariate Asymmetric Approach

Dynamic Linkages among Financial Markets in the Greater China Region: A Multivariate Asymmetric Approach

Factors Influencing Equity Return Correlations between China’s Pairs of A- and B-Share Markets: Effect of QFII’s Implementation

Volatility and Correlation Dynamics of the MainlandChinese and Hong Kong Stock Markets: Evidence from the A-, B-, H- and Red Chip Markets

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