The Chinese Stock Market: A Casino with 'Buffer Zones'?

Girardin, Éric; Liu, Zhenya

doi:10.1080/1476528032000039749

Cited by 29 publications

(18 citation statements)

References 11 publications

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“…Their results imply that a sufficiently high frequency must be used since a Markov-switching specification may be rejected for a quarterly frequency but accepted for a monthly frequency. Markov-switching models also provide evidence of regime changes in stock markets-with bull and bear episodes (Girardin and Liu 2003), or in economic activity-with growth cycles (Girardin 2005). They were extended to allow for regime changes in the coefficients of explanatory variables, or even in a vector-autoregressive framework (Krolzig 1997).…”

Section: Detecting Regime Changes In Basket Compositionmentioning

confidence: 99%

A De Facto Asian-Currency Unit Bloc in East Asia: It has Been There but We did not Look for It

Girardin

2011

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. AbstractPegging in a coordinated way to a regional basket currency is considered by many as optimal for east-Asian countries. By contrast, according to existing empirical studies, these countries have most often relied on noncooperative United States dollar or G3 pegs. We show for the first time that by the late 1990s, with some reversals, a majority of east-Asian countries had already moved, de facto, away from the dollar peg and started targeting a basket, including east-Asian currencies (an "Asian Currency Unit"). Common-shock or market-based interpretations of such moves are ruled out since we document that, with few exceptions, countries in the region have in reality stuck to fixed exchange rates. We obtain such results using a Markov-switching estimation benchmarked against Bai-Perron structural break tests for the synthesis model of Frankel and Wei (2007), which augments the inference about currency weights in a basket with the weight on exchange-market pressure. In order to measure the latter, the forward positions of central banks in the foreign exchange market are taken into account. JEL Classification: F31, F41

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Section: Detecting Regime Changes In Basket Compositionmentioning

confidence: 99%

A De Facto Asian-Currency Unit Bloc in East Asia: It has Been There but We did not Look for It

Girardin

2011

SSRN Journal

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“…The results of all tests are robust under different models (M1, M2, and M3) and different correlation metrics, with or without extreme observation exclusion, and under different risk-free interest rates. Our paper is the first to show that Easton, Harris, and Ohlson's (1992) conclusion is also valid in the world's largest emerging market despite market segmentation (Chen, Lee, and Rui, 2001), the "casino perception" of the Chinese stock market in the media and academia (Girardin and Liu, 2003), and corporate governance problems (Fan, Wong, and Zhang, 2007;Jian and Wong, 2010;Jiang, Lee, and Yue, 2010). As pointed out in Section 2.1, R 2 from the OLS regression could mechanically increase as the return interval expands.…”

Section: Five- Two- and One-year Return Interval Resultsmentioning

confidence: 91%

Aggregate Accounting Earnings and Security Returns: China Evidence and the Replication of US Results

Tang

Zhang

2014

China Account Financ Rev

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This paper examines the earnings-return association over long return intervals. The research design is built upon one important accounting intuition: as earnings are aggregated over longer intervals, the effect of earnings measurement error and the time lag between earnings recognition and market reaction slowly dwindles. Therefore, over time, we should observe an improving association between (aggregate) earnings and stock return. In this study, we first replicate the results of Easton, Harris, and Ohlson (1992) for the same period of 1968-1986 and find very similar results under refined correlation metrics. Second, we expand coverage to test US data from 1962 to 2011 and find that their prediction holds for the past 50 years in the US market. Third, our post-1992 China and US data generate the same pattern of rising earnings-return correlation as the return interval expands, despite China’s immature stock market. Further comparison indicates that the earnings-return correlation in China is lower than that in the US market in the same period of 1992-2011. Finally, to make our results comparable to the original ones in Easton, Harris, and Ohlson (1992), we also report the 1992-2011 results under the original metrics, such as R2 and concordant pair percentage; we still reach the same conclusions. Overall, the empirical results support Easton, Harris, and Ohlson’s theory in both the US market and the emerging China market, extending the external validity of their theory to the international capital market.

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“…They are subjected to herd behaviour and treat the market like a casino without considering the information or fundamentals related to firms (see, e.g. Ma, 1996;Nam et al, 1999;Kang et al, 2002;Girardin and Liu, 2003). The behaviour of these investors has been billed in China as the 'stir-flying stocks' (Kang et al, 2002, p. 246).…”

Section: Notesmentioning

confidence: 98%

Are Chinese stock markets efficient? Further evidence from a battery of nonlinearity tests

Lim

Brooks

2009

Applied Financial Economics

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Given that the efficiency of the Chinese stock markets was empirically examined in extant literature using statistical tests that are designed to uncover linear correlations of price changes, the obtained statistical inferences of efficiency/inefficiency are on very shaky grounds as highlighted in a recent article by Saadi et al. (2006). Motivated by this concern, the present article re-examines the efficiency of the A- and B-shares markets in Shanghai and Shenzhen Stock Exchanges (SHSE and SZSE) using a battery of nonlinearity tests. The empirical investigation reveals strong evidence of nonlinear serial dependence in the underlying returns generating processes for all indices even after removing linear serial correlations from the data, hence, contradicting the unpredictable criterion of weak-form efficient market hypothesis. Theoretically, these results are not surprising given the fact that investors in the Chinese stock markets trade like noise traders, who purely speculate and treat the market like a casino.

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The Chinese Stock Market: A Casino with 'Buffer Zones'?

Cited by 29 publications

References 11 publications

A De Facto Asian-Currency Unit Bloc in East Asia: It has Been There but We did not Look for It

A De Facto Asian-Currency Unit Bloc in East Asia: It has Been There but We did not Look for It

Aggregate Accounting Earnings and Security Returns: China Evidence and the Replication of US Results

Are Chinese stock markets efficient? Further evidence from a battery of nonlinearity tests

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