Spillovers of the U.S. Subprime Financial Turmoil to Mainland China and Hong Kong SAR: Evidence from Stock Markets

 
Author/Editor: Sun, Tao ; Zhang, Xiaojing
 
Publication Date: August 01, 2009
 
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Summary: This paper focuses on evidence from stock markets as it investigates the spillovers from the United States to mainland China and Hong Kong SAR during the subprime crisis. Using both univariate and multivariate GARCH models, this paper finds that China's stock market is not immune to the financial crisis, as evidenced by the price and volatility spillovers from the United States. In addition, HK's equity returns have exhibited more significant price and volatility spillovers from the United States than China's returns, and past volatility shocks in the United States have a more persistent effect on future volatility in HK than in China, reflecting HK's role as an international financial center. Moreover, the impact of the volatility from the United States on China's stock markets has been more persistent than that from HK, due mainly to the United States as the origin of the subprime crisis. Finally, as expected, the conditional correlation between China and HK has outweighed their conditional correlations with the United States, echoing increasing financial integration between China and HK.
 
Series: Working Paper No. 09/166
Subject(s): Asset prices | Capital markets | China, People's Republic of | Credit risk | Economic integration | Economic models | External shocks | Financial crisis | Financial sector | Hong Kong Special Administrative Region of China | Spillovers | Stock markets | Stock prices | United States

Author's Keyword(s): subprime crisis | spillovers | GARCH
 
English
Publication Date: August 01, 2009
Format: Paper
Stock No: WPIEA2009166 Pages: 42
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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