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Hull, Robert M.; Habib, Ashfaq; Khan, Muhammad Asif

Impact of major stock markets on China's stock market

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  • Media type: E-Article
  • Title: Impact of major stock markets on China's stock market
  • Contributor: Hull, Robert M.; Habib, Ashfaq; Khan, Muhammad Asif
  • imprint: Emerald, 2023
  • Published in: Managerial Finance
  • Language: English
  • DOI: 10.1108/mf-01-2023-0022
  • ISSN: 0307-4358
  • Origination:
  • Footnote:
  • Description: <jats:sec><jats:title content-type="abstract-subheading">Purpose</jats:title><jats:p>The main purpose is to explore the impact of major stock markets on China's market where major markets are represented by former G8 nations (current G7 and Russia).</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title><jats:p>The article makes use of: stationarity tests (ADF and PP unit root); long-run correlation tests (Johansen integration involving trace and maximum eigenvalue); impact of G8 markets on China (VECM test); influence of G8 markets on volatility in China's market (variance decomposition analysis) and, effect from shocks in G8 markets on China (impulse response function).</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Findings</jats:title><jats:p>Using a period of 2009–2019 that avoids detecting linkages caused by interdependencies created by two major international crises, the article offers four major findings. First, except for Germany and Russia, G8 markets have a significant causal influence on China with UK having the greatest. Second, G8 markets are not the major source of short-run fluctuation in China's market but over time exercise a noteworthy collective impact with UK having the greatest impact. Third, there are occasions for international portfolio diversification with China's market providing greater diversification than G8 nations. Fourth, all markets provide a short-run window of abnormal profit.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Research limitations/implications</jats:title><jats:p>The indexes used to represent national markets are assumed to be adequate representations.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Practical implications</jats:title><jats:p>Short-term abnormal profits exist. Investing in China, compared to G8 countries, offers greater portfolio diversification possibilities.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Social implications</jats:title><jats:p>Removal of trade and investment barriers cause greater market integration.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Originality/value</jats:title><jats:p>By using recent data, this study reveals that G8 stock markets influence China's market.</jats:p></jats:sec>