Article ID Journal Published Year Pages File Type
5053440 Economic Modelling 2015 7 Pages PDF
Abstract
This paper examines the contagion effect of the European debt crisis on China's stock market. The analysis tests pure contagion effects and interdependence by utilizing the Kalman filter approach to estimate the time-varying correlation coefficients of the stock market indices between the Eurozone and China. The empirical results indicate that after controlling the macro fundamental variables and global shocks, the crisis contagion's effect on investors' psychology in the Chinese capital market is limited. The result of variance analysis demonstrates that macroeconomic variables have played a major role in stock market between China and the Eurozone. The model provides a mechanism for tracing the time varying correlation coefficients in a structured way after controlling the fundamental variables and global shocks and can reflect the changing market dynamics accurately.
Keywords
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Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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