Working Paper: NBER ID: w30893
Authors: Zhiguo He; Yuehan Wang; Xiaoquan Zhu
Abstract: As a bridge between Chinese mainland and international financial markets, the Stock Connect program allows investors on both sides to gain mutual access. By analyzing how cross-border flows respond to macro-related shocks, we show that compared with possibly homemade foreign investors, genuine foreign investors are more likely affected by the U.S. monetary shocks, the exchange rate risk, the U.S. market performance as well as the cross-market valuation disparity. The paper highlights the importance of profiling different groups of cross-border participants over market integration.
Keywords: No keywords provided
JEL Codes: E50; F65; G23; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US monetary policy shocks (E39) | foreign investment flows into China (F21) |
| contractionary monetary policy shock in the US (E39) | northbound flows (L91) |
| AH premium increase (G52) | southbound flows (R41) |
| AH premium increase (G52) | northbound flows (L91) |
| US market performance (N22) | investment from prestigious foreign custodians (F21) |