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JOURNAL OF ACCOUNTING AND FINANCE
Decoupled or Not? What Drives Chinese Stock Markets:
Domestic or Global Factors?
Author(s): Priscilla Liang
Citation: Priscilla Liang, (2013) "Decoupled or Not? What Drives Chinese Stock Markets: Domestic or Global Factors?," Journal of Accounting and Finance, Vol. 13, Iss. 4, pp. 40 - 54
Article Type: Research paper
Publisher: North American Business Press
Abstract:
A Vector Error Correction Models (VECM) is used in this paper to identify the factors that affect Chinese
stock returns. Test results show that Chinese stock performance has long run equilibrium relationships
with both its domestic economic fundamentals and foreign national stock indices. Chinese stocks are
sensitive to policy driven economic variables such as exchange rate and bank loans and deposits, but not
to real economic forces such as the industrial production. Stock performance in China is closely
“coupled” with that in India, Russia, the U.S., Germany, Japan, South Korea, and Mexico. The U.S. has
the most influence on China.
