How Does Hong Kong’s Foreign Tourist Inflow React to Changes in the U.S. and Hong Kong Stock Markets? An Analysis of Lead-Lag Relationships

Purpose: This research aimed to elucidate the time-lag relationship between the U.S. stock market, which holds a leading position in the global arena, the Hong Kong stock market, and the flow of international tourists into Hong Kong. Design/methodology/approach: This study observed 995 daily data points from the S&P 500 Index, Dow Jones Index, and Hang Seng Index, and foreign tourist arrivals of Hong Kong from February 10, 2020 to April 3, 2024. To make both series stationary, this study transformed the original data into symmetric percentage changes using the Shiskin method. In order to determine whether one series can be predicted from another and identifying the most useful lag orders, this study conducted a Cross-Correlations analysis. Findings: The U.S. stock market and the Hang Seng Index co-move contemporaneously with a slight one-day lead from the U.S. side. Inbound tourist arrivals exhibit a delayed response to U.S. stock indices, peaking around +10 trading days. The link between the Hang Seng Index and inbound tourism is weaker, with small positive correlations at +7 and +11 days. These patterns suggest that the U.S. market exerts both direct (financial) and indirect (confidence/macro) influences on Hong Kong’s tourism, while the domestic market’s predictive content for tourism is limited. Research limitations/implications: The results contribute to a better understanding of the various impacts of changes in the stock markets, providing guidance for the formulation of effective tourism development policies and practices. However, this study only collected data from selected indices in the U.S. and Hong Kong stock markets. Future research could expand the scope by evaluating a broader range of indices to enhance the generalizability of the findings. Originality/value: Unlike most earlier studies that only considered the direction of causality between the domestic stock market and tourism, this study explored the time-lag relationships between stock indices and tourism indicators.