Modelling stock market data in China: Crisis and Coronavirus.

Abstract

This paper deals with the analysis of the financial stock market in China, investigating its degree of persistence in order to know if shocks affecting them have temporary or permanent effects. For this purpose we examine the closing prices of the Shanghai and Zhenzhen Composite Indices, with data starting at July and April 1991 respectively and ending at March 2020. Looking at the sample before the coronavirus, the results indicate large degrees of persistence with shocks having permanent effects. Meanwhile, during the period of the coronavirus, the results indicate mean reversion with shocks having temporary effects. This may result from the Chinese government's rapid and effective responses during the outbreak of the pandemic.