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Int. J. Financial Stud. 2017, 5(1), 4; doi:10.3390/ijfs5010004

Policy Impact on the Chinese Stock Market: From the 1994 Bailout Policies to the 2015 Shanghai-Hong Kong Stock Connect

1
Newhuadu Business School, Minjiang University, Fuzhou 350108, China
2
Nottingham University Business School, Jubilee Campus, Nottingham NG8 1BB, UK
*
Author to whom correspondence should be addressed.
Academic Editors: Nicholas Apergis and Katsuhiko Takagaki
Received: 29 August 2016 / Revised: 29 November 2016 / Accepted: 29 November 2016 / Published: 18 January 2017
(This article belongs to the Special Issue New Challenges in Asian Capital Markets)
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Abstract

From the 1994 bailout policies to the 2015 Shanghai-Hong Kong Stock Connect, the policy impact on the Chinese stock market has changed over time. By May 2015, global investors can directly invest in a more legalized and normalized Chinese stock market, whereas they are still concerned about the policy-oriented market and its attendant risks. In this study, we employ the family of GARCH models to investigate the structural changes in risks with the implementation of a series of policies. Our results show that although many policies improve or stabilize the stock market, certain policies lead to substantial volatility. Among them, macro-control policies and transaction cost adjustments are a double-edged sword, which should be used with caution. Furthermore, with opening-up policies being launched recently, the Chinese stock market has entered a new stage in which it affects international capital markets. However, the increased risks, which may result in a sharp turnaround, cause worry. View Full-Text
Keywords: Chinese stock market; policy and regulation; Shanghai-Hong Kong Stock Connect; volatility; GARCH Chinese stock market; policy and regulation; Shanghai-Hong Kong Stock Connect; volatility; GARCH
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Wang, Y.-C.; Tsai, J.-J.; Li, Q. Policy Impact on the Chinese Stock Market: From the 1994 Bailout Policies to the 2015 Shanghai-Hong Kong Stock Connect. Int. J. Financial Stud. 2017, 5, 4.

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