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Econometrics 2015, 3(2), 215-232; doi:10.3390/econometrics3020215

Return and Volatility Spillovers across Equity Markets in Mainland China, Hong Kong and the United States

Department of Economics, Illinois State University, Normal, IL 61761-4200, USA
These authors contributed equally to this work.
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Author to whom correspondence should be addressed.
Academic Editor: Kerry Patterson
Received: 23 January 2015 / Revised: 13 March 2015 / Accepted: 19 March 2015 / Published: 2 April 2015
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Abstract

Examinations of the dynamics of daily returns and volatility in stock markets of the U.S., Hong Kong and mainland China (Shanghai and Shenzhen) over 2 January 2001 to 8 February 2013 suggest: (1) evidence of unidirectional return spillovers from the U.S. to the other three markets; but no spillover between Hong Kong and either of the two mainland China markets; (2) evidence of unidirectional ARCH and GARCH effects from the U.S. to the other three markets; (3) correlations of returns vary across markets, with the highest correlation of 93.5% between the two Chinese markets, medium correlation of 30% between mainland China and Hong Kong markets and low correlations of 6.4% and 7.2% between the U.S. and China’s two markets; thus, international investors may benefit by allocating their assets in China’s markets; (4) the patterns of dynamic conditional correlations from the DCC model suggest an increase in correlation between China and other stock markets since the most recent financial crisis of 2007. View Full-Text
Keywords: stock markets; multivariate GARCH; BEKK; CCC; DCC; dynamic correlation stock markets; multivariate GARCH; BEKK; CCC; DCC; dynamic correlation
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Mohammadi, H.; Tan, Y. Return and Volatility Spillovers across Equity Markets in Mainland China, Hong Kong and the United States. Econometrics 2015, 3, 215-232.

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