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Financial liberalisation and international market interdependence: evidence from China’s stock market in the post-WTO accession period

He, Hongbo; Chen, Shou; Yao, Shujie; Ou, Jinghua

Authors

Hongbo He

Shou Chen

Shujie Yao

Jinghua Ou



Abstract

This paper studies China’s stock market with respect to financial liberalization and international market interdependence after its accession to the WTO in 2001. Using the multi-factor R-squared measure, we derive a normalized index to measure the impact of financial liberalization policies on stock market interdependence between China and the world. Some of China’s financial liberalization measures, such as QFII and exchange rate reform, are found to have played an important role in increasing market interdependence. After the US credit crunch in 2007 and the world financial crisis in the following years, some anomalies were observed as China’s stock market was more interdependent of the global market than the US stock market in some specific periods. These anomalies may have been related to the former’s overreaction and economic overheating.

Journal Article Type Article
Publication Date Nov 1, 2014
Journal Journal of International Financial Markets, Institutions and Money
Print ISSN 1042-4431
Electronic ISSN 1042-4431
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 33
APA6 Citation He, H., Chen, S., Yao, S., & Ou, J. (2014). Financial liberalisation and international market interdependence: evidence from China’s stock market in the post-WTO accession period. Journal of International Financial Markets, Institutions and Money, 33, doi:10.1016/j.intfin.2014.09.005
DOI https://doi.org/10.1016/j.intfin.2014.09.005
Keywords Financial liberalization; Market interdependence; Principal component analysis; Multi-factor R-squared measure
Publisher URL http://www.sciencedirect.com/science/article/pii/S1042443114001164
Copyright Statement Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0





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