Granger causal relations among Greater China stock markets: a nonlinear perspective

Abstract

This article uses linear and nonlinear Granger causality tests to study Granger causal relations among the stock markets of Greater China. In sharp contrast to the results disclosed by its linear counterpart, a nonlinear causality test provides evidence of isolated bi-directional causal relations between two Chinese stock markets and between the HKSE and the TWSE in the earlier period of 1992 to 1999. The nonlinear causality test further shows that, in the later period of 2000 to 2008, Granger causal relations have been strengthened and that Chinese stock markets are well connected with their neighbour markets, the HKSE and the TWSE, and they are playing a most influential role among the stock markets of Greater China.Granger causality, nonlinearity, Greater China, stock market,

Causality networks of financial assets

“…Hiemstra and Jones (1994) having used NGC between the equity returns of Dow Jones stocks, and the volume rate of NYSE, found statistically important causality in both ways. Qiao et al (2011) sought for causalities in East Asia stock markets. Despite the fact that…”

Visibility graph combined with information theory: an estimator of stock market efficiency

“…Hiemstra and Jones (1994), having used the NGC between the equity returns of Dow Jones stocks and the volume rate of the NYSE, found statistically significant causality in both directions. Qiao and Lam (2011) sought causalities in East Asia stock markets. Despite the fact that LGC tests failed to detect statistically significant dependencies, its nonlinear relative, NGC, captured many causalities.…”