Interaction among China-related stocks: Evidence from a causality test with a new procedure

Gary Gang Tian*, Guang Hua Wan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)

Abstract

The purpose of this study is to investigate a causal relationship among five different indices of shares issued by Chinese firms, A-, B- and H-shares listed in China and Hong Kong. This article re-examines the interactions among these China-related stocks using daily time series data by constructing a vector autoregresion (VAR) model. A new Granger no-causality testing procedure developed by Toda and Yamamoto was applied to test the causality link among these five stock indices. The results suggest that the 'closed' B-share markets in Shanghai and Shenzhen exhibit causality relations with each other during the entire period between 1993 and 1999 but this pattern does not exist within A-share markets. Furthermore, evidence is also found of Granger causality running from Hong Kong H-shares to B-shares in Shanghai and Shenzhen, and from Shanghai B-shares to all the rest Chinese markets for the post-1996 period.

Original languageEnglish
Pages (from-to)67-72
Number of pages6
JournalApplied Financial Economics
Volume14
Issue number1
DOIs
Publication statusPublished - 1 Jan 2004
Externally publishedYes

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