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Dynamic Linkages among Financial Markets in the Greater China Region: A Multivariate Asymmetric Approach


  • The authors wish to thank Paul De Grauwe, Les Oxley, participants of the GIEER conference, and the anonymous referees for their invaluable comments, which have substantially improved the study. The first author wishes to acknowledge the research support provided by the Accounting and Finance Association of Australia and New Zealand Grant 2010/2011 and the Start-up (#R62850) and General College Research (#R62888-CGF9) Grants provided by ANU College of Business and Economics. The usual disclaimer applies.


This study examines the volatility dynamics of the Greater China stock markets by employing a multivariate framework that incorporates the features of asymmetries, persistence and time-varying correlations. The multivariate framework with these features will contribute to a better understanding of the interdependence and integration among the stock markets in the Greater China region. Our results confirm the existence of volatility persistence and asymmetries, and there is some evidence of a common degree of persistence (‘co-persistence’) among the markets. It is also found that the Mainland Chinese markets are actually less volatile than the Taiwan and Hong Kong stock exchanges in the late 1990s and early 2000s. The Shenzhen and Shanghai stock exchanges are positively (not perfectly) correlated with each other, but they show a weaker correlation with the Hong Kong and Taiwan markets. These findings have important implications for hedging and portfolio management.