Abstract

This study adopts a bivariate EGARCH model, augmented with correlation index function, to examine the bilateral relationships between the Shanghai A- and B-share stock markets. Daily closing A- and B- share index prices, as well as S&P 500 index prices are used and they span from January 2, 1997 through December 30, 2005, a total of 2170 observations. A mean spillover from the B- to A-share market was found in the post-opening period and not the other way around. In addition, the US market plays an important role of information transmission to the B-share market. Moreover, a change in responsiveness of cross-market correlation to information arrivals was also detected after B-share’s opening to Chinese citizens.

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