Hot Money and Stock Market in China: Empirical Evidence from ARDL and NARDL Approaches

  • Kwang-Jing Yii Swinburne University of Technology, Sarawak Campus
  • Chai-Thing Tan Universiti Tunku Abdul Rahman
  • Nian-Meng Tan Universiti Tunku Abdul Rahman
  • Xue-Wen Teng Universiti Tunku Abdul Rahman
  • Ting-En Khor Universiti Tunku Abdul Rahman
  • Sui-Hang Fan Universiti Tunku Abdul Rahman
Keywords: Hot money, Stock market, ARDL, NARDL, China

Abstract

This study discusses the relationship between hot money and stock market in China by employing the Autoregressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) methods. The data used in this study is quarterly data over the period 2000: Q1 to 2017: Q4. The results show that oil price, economic growth and hot money possess a long-run relationship towards stock market in China, whereas, no effect is found from inflation. The oil price and economic growth are both positively related to stock market while there is a negative relationship from hot money. Furthermore, the study supports the existence of an asymmetric effect between hot money and stock market. The findings imply that policymakers should form better monitoring systems to control the inflow of hot money, thus, strengthening investors’ confidence and avoiding unwanted bubbles in China’s stock market.

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Published
2021-08-12
How to Cite
Kwang-Jing Yii, Chai-Thing Tan, Nian-Meng Tan, Xue-Wen Teng, Ting-En Khor, & Sui-Hang Fan. (2021). Hot Money and Stock Market in China: Empirical Evidence from ARDL and NARDL Approaches. International Journal of Business and Society, 22(2), 713-733. https://doi.org/10.33736/ijbs.3753.2021