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Multifractal detrended cross-correlations between the Chinese exchange market and stock market

Authors
Journal
Physica A Statistical Mechanics and its Applications
0378-4371
Publisher
Elsevier
Publication Date
Volume
391
Issue
20
Identifiers
DOI: 10.1016/j.physa.2012.05.035
Keywords
  • Multifractal Detrended Cross-Correlation
  • Chinese Exchange Market
  • Chinese Stock Market
  • Rolling Windows

Abstract

Abstract Based on the daily price data of the Chinese Yuan (RMB)/US dollar exchange rate and the Shanghai Stock Composite Index, we conducted an empirical analysis of the cross-correlations between the Chinese exchange market and stock market using the multifractal cross-correlation analysis method. The results demonstrate the overall significance of the cross-correlation based on the analysis of a statistic. Multifractality exists in cross-correlations, and the cross-correlated behavior of small fluctuations is more persistent than that of large fluctuations. Moreover, using the rolling windows method, we find that the cross-correlations between the Chinese exchange market and stock market vary with time and are especially sensitive to the reform of the RMB exchange rate regime. The previous reduction in the flexibility of the RMB exchange rate in July 2008 strengthened the persistence of cross-correlations and decreased the degree of multifractality, whereas the enhancement of the flexibility of the RMB exchange rate in June 2010 weakened the persistence of cross-correlations and increased the multifractality. Finally, several relevant discussions are provided to verify the robustness of our empirical analysis.

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