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Article
Publication date: 18 September 2019

Mouna Abdelhedi and Mouna Boujelbène-Abbes

The purpose of this paper is to empirically investigate the volatility spillover between the Chinese stock market, investor’s sentiment and oil market, specifically during…

Abstract

Purpose

The purpose of this paper is to empirically investigate the volatility spillover between the Chinese stock market, investor’s sentiment and oil market, specifically during the 2014‒2016 turmoil period.

Design/methodology/approach

This study used the daily and monthly China market price index, oil-price index and composite index of Chinese investor’s sentiment. The authors first use the DCC GARCH model in order to study the correlation between variables. Second, the authors use a continuous wavelet decomposition technique so as to capture both time- and frequency-varying features of co-movement variables. Finally, the authors examine the spillover effects by estimating the BEKK GARCH model.

Findings

The wavelet coherency results indicate a substantial co-movement between oil and Chinese stock markets in the periods of high volatility. BEKK GARCH model outcomes confirm this relation and report the noteworthy bidirectional transmission of volatility between oil market shocks and the Chinese investor’s sentiment, chiefly in the crisis period. These results support the behavioral theory of contagion and highlight that the Chinese investor’s sentiment is a channel through which shocks are transmitted between the oil and Chinese equity markets. Thus, these results are important for Chinese authorities that should monitor the investor’s sentiment to better control the interaction between financial and real markets.

Originality/value

This study makes three major contributions to the existing literature. First, it pays attention to the recent 2015 Chinese stock market bumble. Second, it has gone some way toward enhancing our understanding of the volatility spillover between the investor’s sentiment, investor’s sentiment variation, oil prices and stock market returns (variables of interest) during oil and stock market crises. Third, it uses the continuous wavelet decomposition technique since it reveals the linkage between variables of interest at different time horizons.

Details

International Journal of Emerging Markets, vol. 15 no. 2
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 9 October 2020

Vijay Kumar Shrotryia and Himanshi Kalra

The present study looks into the mimicking behaviour in both normal and asymmetric scenarios. It, then, considers the contagion between the USA and the BRICS stock…

Abstract

Purpose

The present study looks into the mimicking behaviour in both normal and asymmetric scenarios. It, then, considers the contagion between the USA and the BRICS stock markets. Finally, it examines herd behaviour in the wake of a major banking policy change concerning the bloc under study.

Design/methodology/approach

The current empirical analysis employs daily, weekly and monthly data points to estimate relevant herding parameters. Quantile regression specifications of Chang et al. (2000)'s dispersion method have been applied to detect herd activity. Also, dummy regression specifications have been used to examine the impact of various crises and strategically crucial events on the propensity to herd in the BRICS markets. The time period under consideration ranges from January 2011 until May 2019.

Findings

The relevant herding coefficients turn insignificant in most cases for normal and asymmetric scenarios except for China and South Africa. This can be traced to the anti-herding behaviour of investors, where individuals tend to diverge from the consensus. However, turbulence makes all stock markets to show some collective trading except Russia. Further, the Chinese stock market seems immune to the frictions in the US stock market. Finally, the Indian and South African markets witness significant herding during the formation of a common depository institution.

Practical implications

Most stock markets seem to herd during turbulence. This revelation is of strategic importance to the regulators and capital market managers. They have to be cautious during crises periods as the illusion of being secured with the masses ends up creating unprecedented frictions in the financial markets.

Originality/value

The present study seems to be the very first attempt to test the relevant distributions' tails for convergent behaviour in the BRICS markets.

Details

Review of Behavioral Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 14 May 2020

Yuhe Wang, Gui Ye, Yuxin Zhang, Ping Mu and Hongxia Wang

In response to the 2008 financial crisis, the performance of the Chinese construction industry seems to be more successful, especially in total factor productivity growth…

Abstract

Purpose

In response to the 2008 financial crisis, the performance of the Chinese construction industry seems to be more successful, especially in total factor productivity growth (TFPG) and its contribution (TFPGC). Hence, the purpose of this paper is to investigate and reveal the potential successful lessons in this regard.

Design/methodology/approach

This study is conducted innovatively based on a special comparative analysis of TFPG and TFPGC between pre- and post-2008 financial crisis. Solow Residual Approach is used to measure TFPG and TFPGC for the period 2002–2016. Given that the crisis hit China at the end of 2008, the pre-2008 financial crisis period is from 2002 to 2008, and the post-2008 financial crisis period is limited to 2009–2016.

Findings

The results indicate that the industry indeed has better performance in promoting TFPG and TFPGC, TFP thus achieved significant accumulative growth before and after the crisis. However, from an evolutionary perspective, both TFPG and TFPGC presented an overall downward trend from before the crisis to after the crisis. Further, the game between the centrally planned economy and the market-oriented economy was identified and revealed as the essential reason behind the evolution of TFPG and TFPGC.

Practical implications

Some valuable lessons for policies and practices in promoting TFPG and TFPGC were summarized and learned from the Chinese experience, such as reducing administrative intervention and making the construction market play a decisive role.

Originality/value

This study provides some new empirical evidence to enrich the overall body of knowledge on growth theory, especially in promoting TFPG and TFPGC.

Details

Engineering, Construction and Architectural Management, vol. 27 no. 10
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 12 March 2019

Yixi Ning, Gubo Xu and Ziwu Long

This study aims to examine the venture capital (VC) industry in China. It has demonstrated a history of high growth with significant variations over time. The authors have…

Abstract

Purpose

This study aims to examine the venture capital (VC) industry in China. It has demonstrated a history of high growth with significant variations over time. The authors have examined the trends and determinants of VC investments in China over a 20-year period from 1995 to 2014. They find that the aggregate amount of VC investments, the total number of venture deals and the average amount of venture investments per deal in China are all significantly impacted by macroeconomic conditions (i.e. GDP, export, money supply), technology innovations and financial market indicators (i.e. initial public offerings (IPOs), interest rate, price-to-earnings ratio, etc.). They also find that the 2007 China A-Share stock market crash and the subsequent global financial crisis have motivated VCists in China to adjust their investment strategies and risk levels by allocating more capital to later-stage investments and securing more deals with later-round financings. However, after the 2008 global financial crisis, the China’s venture industry has recovered faster compared to the US counterpart response.

Design/methodology/approach

The authors first perform trend analysis of VC investments at an aggregate level, by stages of development, and across industry from 1995 to 2014.To test H1 and H2, the authors use multiple regression models with lagged explanatory variables. To test H3, the authors use univariate tests to compare the measures of VC investments at an aggregate level, stage funds ratios, stage deals ratios and financing series ratios during both a five-year and seven-year time windows around the 2007 A-Share stock market crash and the subsequent financial crisis.

Findings

The development of the VC industry in China has demonstrated a history of high growth with significant variation over time. The authors find that the aggregate amount of VC investments, the total number of venture deals and the average amount of venture investments per deal in China are all significantly impacted by macroeconomic conditions (i.e. GDP, export, money supply), technology innovations and financial market indicators (i.e. IPOs, interest rate, price-to-earnings ratio, etc.). The authors also find that the 2007 China A-Share stock market crash and the subsequent global financial crisis have motivated VCists in China to adjust their investment strategies and risk by allocating more capital to later-stage investments and securing more deals with later-round financings. However, the China VC industry has recovered faster compared to the USA just after the 2008 global financial crisis.

Research limitations/implications

There are also limitations in the study. The VC data in China in the earlier 1990s might not be very reliable due to the quality of statistics. Therefore, the trend analysis and discussions mainly focus on the time after 2000. Also, the authors cannot find VC financing sequence data for the analysis. Second, there is no doubt that the policy impact from Chinese transforming economic system and government policies on its VC industry is substantial (Su and Wang, 2013). However, they cannot find an appropriate variable to be included in the empirical models to consider this effect. Further study on this area would provide meaningful information. Third, although the authors have done comparison study between the VC industry in China in this study and the VC industry in the US documented in Ning et al. (2015) and discussed some interesting findings, more in-depth research in this area will be very useful.

Practical implications

The findings have meaningful implications for VCists and start-up companies seeking equity financings in China. VCists should closely monitor macroeconomic and market conditions to make appropriate adjustments to their risk and investment strategies. Entrepreneurs seeking equity financings for their business could also monitor the identified macroeconomic and market indicators, which can help them with their timing and to negotiate a better equity financing deal. VC financing is more likely to succeed when key macroeconomic and market indicators become favorable.

Originality/value

This paper contributes to the literature by testing the supply and demand theory on the VC market proposed by Poterba (1989) and Gompers and Lerner (1998) from the macroeconomic perspective using 20 years’ VC data from China. The authors also examine how the 2007 A-Share stock market crash and the subsequent financial crisis affected VCists to adjust their risk levels and investment strategies. It provides useful information for international academia and policymakers to understand the quick rise of China VC industry. The authors also find that the macroeconomic drivers of VC industry are somewhat different under different economic systems.

Details

Chinese Management Studies, vol. 13 no. 3
Type: Research Article
ISSN: 1750-614X

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Article
Publication date: 22 February 2021

Panayiotis Tzeremes

This study aims to examine the interconnection among the oil volatility index (OVX) and the Chinese stock markets (CSM) during the financial crisis over the period June 1…

Abstract

Purpose

This study aims to examine the interconnection among the oil volatility index (OVX) and the Chinese stock markets (CSM) during the financial crisis over the period June 1, 2007 to June 26, 2012.

Design/methodology/approach

Applying the time-varying Granger causality test, this paper conducts an exhaustive analysis of the OVX and the CSMs during the financial crisis. In particular, the financial crisis is classified in three stages, namely, the US subprime crisis, the global financial crisis and the sovereign debt crisis.

Findings

Briefly, the findings indicate almost a neutral relationship between the OVX and the CSMs during the entire financial crisis, the US subprime crisis and the global financial crisis. Finally, this paper has found a positive relationship between the OVX and the CSMs during the sovereign debt crisis.

Practical implications

This outcome clearly suggests that Chinese investors have to disregard uncertain information. In addition, policymakers can ameliorate the willingness of market investors in the CSM and further deepen the market-oriented reform of China’s domestic oil prices.

Originality/value

The innovative combination of these two strands, the OVX and the three stages of the financial crisis, is empirically examined in the study and this paper finds a non-linear linkage between the OVX and CSMs.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 14 no. 2
Type: Research Article
ISSN: 1754-4408

Keywords

Content available
Article
Publication date: 13 July 2021

Taicir Mezghani, Mouna Boujelbène and Mariam Elbayar

The main objective of this paper is to investigate whether the investors' behavior under optimistic (pessimistic) conditions has an impact on risk transmission between the…

Abstract

Purpose

The main objective of this paper is to investigate whether the investors' behavior under optimistic (pessimistic) conditions has an impact on risk transmission between the Chinese stock and bond markets and the sector indices mainly during the COVID-19 pandemic.

Design/methodology/approach

This study uses a new measure of the investor's sentiment based on Google trend to construct a Chinese investor's sentiment index and a quantile causal approach to examine the causal relationship between googling investor's sentiment and the Chinese stock and bond markets as well as the sector indices. On the other hand, the network connectedness is used to estimate the spillover effect on the investor's sentiment and index returns. To check the robustness of the study results, the authors employed the Chinese VIX, as another measure of the investor's sentiment using daily data from May 2019 to December 2020.

Findings

In fact, the authors found a dual causality between the investor's sentiment and the financial market indices in optimistic or pessimistic situations, which indicates that positive and negative financial market returns may have an effect on the Chinese investor's sentiment. In addition, the results indicated that a pessimistic investor's sentiment has a negative impact on the banking, healthcare and utility sectors. In fact, the study results provide a significant peak of connectivity between the investor's sentiment, the stock market and the sector indices during the 2015–2016 and 2019–2020 turmoil periods that coincide respectively with the 2015 recession of the Chinese economy and the COVID-19 pandemic.

Originality/value

This finding suggests that the Chinese googling investor's sentiment is considered as a prominent channel of shock spillovers during the coronavirus crisis, which confirms the behavioral contagion. This study also identifies the contribution of a particular interest for portfolio managers and investors, which helps them to accordingly design their portfolio strategy.

Details

China Finance Review International, vol. 11 no. 3
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 11 September 2017

Amanjot Singh and Manjit Singh

This paper aims to attempt to re-capture the stock market contagion effect from the US to the BRIC equity markets during the recent global financial crisis in a…

Abstract

Purpose

This paper aims to attempt to re-capture the stock market contagion effect from the US to the BRIC equity markets during the recent global financial crisis in a multivariate framework. Apart from this, the study also identifies optimal portfolio hedging strategies to minimize the underlying portfolio risk during the period undertaken for the purpose of study.

Design/methodology/approach

To account for the dynamic interactions, the study uses vector autoregression (p) dynamic conditional correlation (DCC)-asymmetric generalized autoregressive conditional heteroskedastic (1,1) model in a multivariate framework, coupled with a monthly heat map relating to the co-movement between the US and the BRIC equity markets during the period 2007-2009. Finally, by following the studies, Hammoudeh et al. (2010) and Syriopoulos et al. (2015), the time-varying optimal portfolio hedge ratios and weights are computed.

Findings

The results report a contagion impact of the US subprime crisis (following the collapse of the Lehman Brothers) on the Indian and Russian stock markets only. On the other hand, a higher degree of interdependence between the US and Brazilian market has been observed. The US and Chinese equity markets indicate a relatively lower level of interdependence among themselves. The optimal hedge ratios are found to be most effective for a portfolio comprising the US and Chinese stocks even during the crisis period. A US investor should invest approximately 30 cents in the Indian market and rest of the 70 cents in the US market in a US$1 portfolio to minimize the portfolio risk without lowering the expected returns. During the crisis period (2007-2009), the optimal portfolio weights indicate a higher weightage to the BRIC stocks.

Practical implications

The results support the construction of optimal US–BRIC stock portfolios and provide an insight to the investors and policy makers both domestic as well as international, with regard to the contagion impact and interdependence, especially during a crisis period.

Originality/value

The study uses a DCC model in a multivariate framework instead of bivariate, wherein all the markets are factored into a single interaction framework across a very long period (2004-2014). Second, a heat map of monthly correlation combinations has been created for the period 2007-2009, to comprehend the contagion impact or interdependence among the markets. Finally, the study ascertains time-varying optimal hedge ratios and portfolio weights for a two asset portfolio, from a US investor viewpoint, making the study first of its kind in all the perspectives.

Details

International Journal of Law and Management, vol. 59 no. 5
Type: Research Article
ISSN: 1754-243X

Keywords

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Book part
Publication date: 8 August 2017

Lorenzo Fusaro

This paper attempts to critically question present IPE approaches and analyses that aim at assessing China’s role within the international political economy. Thus, unlike…

Abstract

This paper attempts to critically question present IPE approaches and analyses that aim at assessing China’s role within the international political economy. Thus, unlike common theorizations that see the country as being integrated within US hegemony (Panitch and Gindin) or those accounts that claim that we are already witnessing the “terminal crisis” of US hegemony accompanied by a hegemonic transition toward China (Arrighi), the paper will argue that China was able to gain “relative geopolitical autonomy” as a result of the revolutionary processes it went through and eventually assert itself as a contender state, now just in the process of challenging US hegemony. Dissatisfied with existent theorizations of hegemony, I will be drawing on the critical edition of Gramsci’s Quaderni and attempt to offer a new perspective regarding the conceptualization thereof. Thus applying the elaborated framework of analysis to the current situation, I argue that unlike the US’s ability to counter the challenge of its traditional imperial rivals Germany and Japan as they developed under the grip of US hegemony, the country is facing difficulties in countering China’s ascent. However, while maintaining that China does indeed represent a challenge to US hegemony, particularly in East Asia, I will argue that the idea of a “crisis of US hegemony” is premature as China remains distant from fully realizing hegemonic relations, even at the regional level.

Details

Return of Marxian Macro-Dynamics in East Asia
Type: Book
ISBN: 978-1-78714-477-4

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Article
Publication date: 24 September 2020

Kerry Liu

On May 24, 2019, the People’s Bank of China (China’s central bank) announced that the Baoshang Bank had been taken over because of credit risk. The Baoshang Bank failure…

Abstract

Purpose

On May 24, 2019, the People’s Bank of China (China’s central bank) announced that the Baoshang Bank had been taken over because of credit risk. The Baoshang Bank failure has caused concerns over the stability of the Chinese financial system and the Chinese economy. This study aims to examine the case of Baoshang Bank’s failure and its theoretical implications including the relation between ownership structure and bank performance, the monetary transmission during a banking crisis and the market response to Baoshang Bank failure. Then this study discusses policy implications.

Design/methodology/approach

This study adopts a two-stage least squared model to examine the relation between ownership structure and bank performance, a series of rolling regressions to examine the monetary transmission and event studies to examine the market response to Baoshang Bank failure.

Findings

This study finds that there is a nonlinear relation between ownership structure and bank performance, the interest pass-through has broken down after the Baoshang Bank failure and the Baoshang Bank failure and the gradual exit of implicit guarantee from the Chinese government are considered to be positive to the Chinese banking sector.

Originality/value

First, although previous studies on ownership structure and bank performance classified different types of larger shareholders and found that this nonlinear relation is insignificant, this study finds a significant relation by innovatively using a combined ownership. Second, further contributing to the studies on monetary transmission in banking crisis based on international data, this study based on Chinese data sets finds that the interest rate pass-through has broken down after the Baoshang Bank failure.

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Article
Publication date: 20 June 2016

Amanjot Singh and Manjit Singh

This paper aims to attempt to capture the co-movement of the Indian equity market with some of the major economic giants such as the USA, Europe, Japan and China after the…

Abstract

Purpose

This paper aims to attempt to capture the co-movement of the Indian equity market with some of the major economic giants such as the USA, Europe, Japan and China after the occurrence of global financial crisis in a multivariate framework. Apart from these cross-country co-movements, the study also captures an intertemporal risk-return relationship in the Indian equity market, considering the covariance of the Indian equity market with the other countries as well.

Design/methodology/approach

To account for dynamic correlation coefficients and risk-return dynamics, vector autoregressive (1) dynamic conditional correlation–asymmetric generalized autoregressive conditional heteroskedastic model in a multivariate framework and exponential generalized autoregressive conditional heteroskedastic model in mean with covariances as explanatory variables are used. For an in-depth analysis, Markov regime switching model and optimal hedging ratios and weights are also computed. The span of data ranges from August 10, 2010 to August 7, 2015, especially after the global financial crisis.

Findings

The Indian equity market is not completely decoupled from mature markets as well as emerging market (China), but the time-varying correlation coefficients are on a downward spree after the global financial crisis, except for the US market. The Indian and Chinese equity markets witness a highest level of correlation with each other, followed by the European, US and Japanese markets. Both the optimal portfolio hedge ratios and portfolio weights with two asset classes point out toward portfolio risk minimization through the combination of the Indian and US equity market stocks from a US investor viewpoint. A negative co-movement between the Indian and US market increases the conditional expected returns in the Indian equity market. There is an insignificant but a negative relationship between the expected risk and returns.

Practical implications

The study provides an insight to the international as well as domestic investors and supports the construction of cross-country portfolios and risk management especially after the occurrence of global financial crisis.

Originality/value

The present study contributes to the literature in three senses. First, the period relates to the events after the global financial crisis (2007-2009). Second, the study examines the co-movement of the Indian equity market with four major economic giants such as the USA, Europe, Japan and China in a multivariate framework. These economic giants are excessively following the easy money policies aftermath the financial crisis so as to wriggle out of deflationary phases. Finally, the study captures risk-return relationship in the Indian equity market, considering its covariance with the international markets.

Details

Journal of Indian Business Research, vol. 8 no. 2
Type: Research Article
ISSN: 1755-4195

Keywords

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