Is it China that leads the Asian stock market contagion in 2015?

ABSTRACT

This article examines the influence of China B-share aggregates on major Asian stock market aggregates during 2015 China crash. Results indicate the China market shows strong negative impact and is highly responsible for leading most markets down during the crash.

KEYWORDS:

• Stock market crash
• historical decomposition
• LiNGAM algorithm
• China

JEL CLASSIFICATION:

• C32
• G14

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ https://www.theguardian.com/business/2015/jul/08/china-stock-market-crisis-explained.

² In this article, China refers to mainland China.

³ We also considered T as 11 June 2015 (two trading days before crash) and obtained very similar results.

⁴ Shanghai SE Composite Index consists of 1113 A-shares and 52 B-shares.

⁵ As a preliminary analysis, we indeed used Shanghai SE Composite and Shanghai SE A-share indices in similar decompositions. Here, China is generally not a major factor in other markets.

⁶ We also considered Shenzhen SE B Share Index, which indicates China’s nontrivial role, much as we see in the present study.