Financial Markets and Portfolio Management

, Volume 32, Issue 2, pp 207–233 | Cite as

The dynamic dependence between stock markets in the greater China economic area: a study based on extreme values and copulas

  • Saiful Izzuan Hussain
  • Steven LiEmail author


This study employs the dynamic copula method and extreme value theory to investigate the dependence structure between pairs of greater China economic area (GCEA) stock markets consisting of Shanghai (SHSE), Shenzhen (SZSE), Hong Kong (HKSE), and Taiwan (TWSE) stock exchanges from July 2000 to June 2017. We also examine the impact of financial crisis on the dependence structure by considering the global financial crisis and the Chinese stock market crash (2015–2016). Many studies have shown that the benefits of portfolio diversification across the stock markets in the same region could be diminishing. However, it is interesting to see that the diversification benefits appear to be viable for investing in some GCEA pairs of stock markets (SHSE–TWSE and SZSE–HKSE).


Copula Extreme value theory Dependence structure Chinese stock markets Financial crisis 

JEL Classification

G15 G32 



The authors thank the editor and the referee for their constructive comments and suggestions, which helped to improve the paper significantly.


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Copyright information

© Swiss Society for Financial Market Research 2018

Authors and Affiliations

  1. 1.Graduate School of Business and Law (GSBL)RMIT UniversityMelbourneAustralia
  2. 2.School of Mathematical Sciences, Faculty of Science and TechnologyUniversiti Kebangsaan MalaysiaBangiMalaysia

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