Economics, Econometrics and Finance
5 years ago

Financial liberalization inhibits China-US stock market linkages; trade dependence strengthens them.

DEStech Transactions on Economics Business and Management
The Impact of Financial Liberalization and Trade Dependence on Stock Market Linkages between China and the US
Jui‐Jung Tsai, Yang‐Chao Wang, Wei-Jie Huang

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Globalization is making the stock markets of China and the US more connected. By looking at the Shanghai Stock Exchange and the S&P 500, researchers found that China's limited financial openness weakens the link between the two markets. However, stronger trade ties between the two countries lead to stronger stock market connections. Economic indicators like GDP growth, CPI, and interest rates don't explain changes in stock market linkages.