Dependence structures between Chinese stock markets and the international financial market: Evidence from a wavelet-based quantile regression approach |
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| Affiliation: | 1. School of Finance, Zhongnan University of Economics and Law, 182 Nanhu Avenue, East Lake High-tech Development Zone, Wuhan 430-073, PR China;2. Research Center of Finance, Shanghai Business School, 2271 West Zhongshan Road, Shanghai 200235, PR China;3. School of Business, East China University of Science and Technology, 130 Meilong Road, Xuhui District, Shanghai 200-237, PR China;4. School of Public Administration, South China Normal University, Guangzhou Higher Education Mega Center, Guangzhou 510-006, PR China;5. Faculty of Economics, Kobe University, 2-1, Rokkodai, Nadaku, Kobe 657-8501, Japan;1. University of Louisiana at Lafayette, B.I. Moody III College of Business, Department of Economics & Finance, 214 Hebrard Boulevard, Moody Hall 253, P.O. Box 44570, Lafayette, LA 70504-4570, United States;2. Department of Economics, School of Business and Economics, Wilfrid Laurier University, 75 University Avenue West, Waterloo, ON N2L 3C5, Canada;1. Department of Economics, Universidade de Santiago de Compostela, Spain;2. Dipartimento di Statistica, Informatica, Apllicazioni “G. Parenti”, Università di Firenze, Italy;1. Department of Banking and Finance, National Chiayi University, 580 Sinmin Road, Chiayi City 60054, Taiwan;2. Department of Applied Economics, National Chiayi University, 580 Sinmin Road, Chiayi City 60054, Taiwan |
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| Abstract: | In this study, we investigate the dependence structures between six Chinese stock markets and the international financial market including possible safe haven assets and global economic factors under different market conditions and investment horizons. The research is conducted by combining a quantile regression approach with a wavelet decomposition analysis. Although we find little or insignificant dependence under short investment horizons, we detect the strong asymmetric dependence of oil prices and the US dollar index on the six Chinese stock markets in the medium and long terms. Moreover, not only is crude oil not a safe haven, it may damage Chinese stock markets as it increases over the long term, even in bull markets. Meanwhile, appreciation of the US dollar (depreciation of RMB) damages (boosts) Chinese stock markets during bull (bear) market conditions under long investment horizons. Moreover, we find that VIX (volatility index)-related derivatives may serve as good risk management tools under any market condition, while gold is a safe haven asset only during crisis periods. |
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| Keywords: | Chinese stock market Wavelet Quantile regression analysis |
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