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The Chinese Stock Market Does not React to the Japanese Market: Using Intraday Data to Analyse Return and Volatility Spillover Effects

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Abstract

In this paper, we use high-frequency data to explore the effects of return and volatility spillover during periods in which trading hours in China and Japan overlap. Specifically, we utilize 5-min returns to estimate fractionally integrated asymmetric power autoregressive conditional heteroskedasticity and fractionally integrated exponential generalized autoregressive conditional heteroskedasticity models, then use the models’ standardized residuals to employ a cross-correlation function approach that tests for the degree to which the Chinese and Japanese markets affect each other. Results indicate a unidirectional influence of the Chinese stock market on Japanese markets in terms of return. This result is likely attributable to restrictions on foreign investment in the Chinese market and the lack of diversified international portfolios among individual Chinese investors.

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Authors and Affiliations

  1. University of International Business and Economics, China

    Yusaku Nishimura

  2. Konan University, Japan

    Yoshiro Tsutsui

  3. Kwansei Gakuin University, Japan

    Kenjiro Hirayama

Authors
  1. Yusaku Nishimura
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  2. Yoshiro Tsutsui
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  3. Kenjiro Hirayama
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Nishimura, Y., Tsutsui, Y. & Hirayama, K. The Chinese Stock Market Does not React to the Japanese Market: Using Intraday Data to Analyse Return and Volatility Spillover Effects. JER 67, 280–294 (2016). https://doi.org/10.1111/jere.12086

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