An Empirical Study of the impact of Turbulent Events, Trading Connections, and Policy Uncertainty on China's Interaction with Global Major Stock Markets
|Title:||An Empirical Study of the impact of Turbulent Events, Trading Connections, and Policy Uncertainty on China's Interaction with Global Major Stock Markets||Authors:||Shi, Yujie||Permanent link:||http://hdl.handle.net/10197/13242||Date:||2022||Online since:||2022-11-07T16:06:12Z||Abstract:||To better understand the role of China in the financial integration, this study attempts to empirically investigate the interactions between China and other major global economies in international stock markets. It consists of three papers to examine the impact of turbulent events, bilateral trade, and policy uncertainty on China’s interaction with major global stock markets. The first paper investigates the impact of the US-China Trade War on co-movements between US and Chinese stock markets. The results indicate that co-movements amongst mainland China, Hong Kong and US stock markets are positively affected by news releases and, after the official start of the trade war (6th July 2018), are enhanced significantly. More precisely, there is also empirical evidence of positive announcement effects in stock market co-movements between the US and mainland China in specific sectors (particularly, Industrials and Information Technology). For international investors, this evidence suggests that the US-China Trade War has reduced the benefit of portfolio diversification in managing risk. The second paper investigates stock market co-movement between China and its 12 trading partners in the Asia-Pacific region after the Global Financial Crisis (GFC). The empirical results show that recent events (specifically, the Shanghai stock market crash, the US-China tariff war, and the COVID-19 pandemic) have increased the incidences of contagion across stock markets in China and its trading partners. Moreover, bilateral trade and market similarities are major drivers of stock market co-movements between China and developed partners, as well as between China and emerging partners. Apart from country-pair-specific factors, common factors (such as the Chinese illiquidity pressure) also affect the co-movements between Chinese and its partners' stock markets during the full period of the study, as well as during the periods of turmoil. The regression results for contagion episodes are mixed. The third paper attempts to compare the impact of Chinese and US economic policy uncertainty (proxied by the EPU index) on the volatility of eleven major stock markets. Both daily and monthly data are utilized in this empirical research. The empirical results show that the impact of US EPU is reinforced at daily and monthly frequencies during the GFC, with European stock markets affected to a greater extent by the GFC. The rising influence of Chinese EPU after the GFC is observed at monthly frequency in several stock markets located in Asia and elsewhere. The dynamic pattern of spillovers from EPU indices to stock volatility suggests the dominant role of US EPU in most markets at daily frequency, and that the extent of spillovers is driven by turbulent events such as the financial crisis and the COVID-19 pandemic.||Type of material:||Doctoral Thesis||Publisher:||University College Dublin. School of Economics||Qualification Name:||Ph.D.||Copyright (published version):||2022 the Author||Keywords:||Turbulent events; Stock market co-movement; Economic policy uncertainty; Spillover||Language:||en||Status of Item:||Peer reviewed||This item is made available under a Creative Commons License:||https://creativecommons.org/licenses/by-nc-nd/3.0/ie/|
|Appears in Collections:||Economics Theses|
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