Chinese Stock Market and the U.S. Influence: Analysis of Intraday Returns

Using the data of every minute index of Shanghai and Shenzhen stock markets and daily closing price of S&P 500, this paper investigates the spillover effect of day (t-1) U.S. stock market on time sectionalized Shanghai and Shenzhen stock markets on day t. for the period from September 1, 2008 to February 27, 2009. The empirical results show significant correlation between lagged U.S. stock market and overnight (close-to-open) Chinese stock markets, while the influence of lagged U.S. stock market is limited to the first ten minutes of Chinese market opening. We also find asymmetric response patterns of the Chinese market to the positive and negative U.S. influence. If the day (t-1) U.S. stock market return is positive, making long position on opening price of Chinese stock market yields significant abnormal return; on contrary, if the day (t-1) U.S. stock market return is negative, there is no significant abnormal return from making short position on opening price of Chinese stock market.