TY - JOUR
T1 - The asymmetric effects of official interest rate changes on China's stock market during different market regimes
AU - Lv, Xin
AU - Dong, Weijia
AU - Fang, Fang
N1 - Publisher Copyright:
Copyright © Taylor & Francis Group, LLC.
PY - 2015/1/1
Y1 - 2015/1/1
N2 - We investigate the effects of China's official interest rate changes on its stock market. We first prove there is a negative relationship between official rate changes and stock returns, as measured by cumulative abnormal returns (CARs). Then, we divide the Chinese stock market into three regimes (bull, medium, and bear) and indicate that official rate changes have asymmetric effects on CARs during different market regimes, although these effects differ from the effects of interest rate changes on the U.S. market. Specifically, official rate changes have the largest negative effects during bear markets and the smallest effects during medium markets.
AB - We investigate the effects of China's official interest rate changes on its stock market. We first prove there is a negative relationship between official rate changes and stock returns, as measured by cumulative abnormal returns (CARs). Then, we divide the Chinese stock market into three regimes (bull, medium, and bear) and indicate that official rate changes have asymmetric effects on CARs during different market regimes, although these effects differ from the effects of interest rate changes on the U.S. market. Specifically, official rate changes have the largest negative effects during bear markets and the smallest effects during medium markets.
KW - China's stock market
KW - Cumulative abnormal returns (CARs)
KW - Markov regime-switching model
KW - Official interest rate
UR - http://www.scopus.com/inward/record.url?scp=84943391162&partnerID=8YFLogxK
U2 - 10.1080/1540496X.2015.1047305
DO - 10.1080/1540496X.2015.1047305
M3 - Article
AN - SCOPUS:84943391162
SN - 1540-496X
VL - 51
SP - 826
EP - 841
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
IS - 4
ER -