Are Chinese Stock Market Cycles Duration Independent?



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Are Chinese Stock Market Cycles Duration Independent?

Haiqiang Chen

Department of Economics, Cornell University
Terence Tai-Leung Chong1

Department of Economics

The Chinese University of Hong Kong
Zimu Li

Department of Economics

The Chinese University of Hong Kong

19/1/2010




Abstract


This paper studies the duration properties of the Chinese stock market cycle. We find evidence for duration dependence in both A-share and B-share markets for whole cycles. The results reject the random walk hypotheses for both markets. For half-cycles, evidence of duration dependence for expansions in the Shanghai A-share market is found. For the Shenzhen B-share market, there is little evidence of duration dependence for half cycles. Although the B-share market is less liquid as compared to the A-share market, the results of this study suggest that the B-share market is more efficient than the A-share market. An important implication is that the quality of market participants plays an important role in the duration property of the Chinese stock market.

Keywords: Duration Dependence; Stock Market Cycles; Moving Average.


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