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@article{ART002663547},
author={Jinho Jeong and Siqi Chen and Geesun Lee},
title={The Effect of US-China Trade War on the US and Chinese Stock Markets},
journal={Journal of Asia-Pacific Studies},
issn={1225-8539},
year={2020},
volume={27},
number={4},
pages={5-27},
doi={10.18107/japs.2020.27.4.001}

TY - JOUR
AU - Jinho Jeong
AU - Siqi Chen
AU - Geesun Lee
TI - The Effect of US-China Trade War on the US and Chinese Stock Markets
JO - Journal of Asia-Pacific Studies
PY - 2020
VL - 27
IS - 4
PB - Institute of Global Affairs
SP - 5
EP - 27
SN - 1225-8539
AB - This study provides an empirical analysis of the US-China trade war impacts on its stock markets. Using 20 years of daily return series of S&P 500 and SSE Composite Indices from 2000 and 2019, we investigate volatility clustering, asymmetric volatility under EGARCH and TGARCH models that effectively captures the time-varying volatility in the pre- and the post-trade war eras. We found the following results. First, volatility clustering is significant during the pre-trade war period for both the US and Chinese stock markets. However, the level of clustering was increased in the US and decreased in China during the post-trade war period, implying that the US stock market responded more sensitive relative to Chinese stock market. Second, the volatility persistence in US was decreased while it was increased in China during the US-China trade war period. The results suggest that US Federal Reserve’s active stabilization policies help quickly absorb the trade war shock. Third, the presence of asymmetric volatility in the pre-trade war period was identified both in the US and Chinese stock markets. However, the degree of asymmetry in China is lower than that of US. More importantly, in China, asymmetric volatility is not significant in the post-trade war period, suggesting the insensitive responses of Chinese investors to debt ratio and risk premium increase during the market turmoil. Finally, the possibility of adverse asymmetric volatility in Chinese stock market is discovered during the trade war period, suggesting that Chinese investors respond more sensitively to good news than bad news. Overall, the government’s active engagement seems to be effective for market stabilization during the market turbulence in US. In addition, we found the possibility of speculative investment increase in China because of adverse asymmetric volatility in Chinese stock market.
KW - US-China Trade War;Volatility Clustering;Asymmetric Volatility;Contrarian Strategy;GARCH
DO - 10.18107/japs.2020.27.4.001
ER -

Jinho Jeong, Siqi Chen and Geesun Lee. (2020). The Effect of US-China Trade War on the US and Chinese Stock Markets. Journal of Asia-Pacific Studies, 27(4), 5-27.

Jinho Jeong, Siqi Chen and Geesun Lee. 2020, "The Effect of US-China Trade War on the US and Chinese Stock Markets", Journal of Asia-Pacific Studies, vol.27, no.4 pp.5-27. Available from: doi:10.18107/japs.2020.27.4.001

Jinho Jeong, Siqi Chen, Geesun Lee "The Effect of US-China Trade War on the US and Chinese Stock Markets" Journal of Asia-Pacific Studies 27.4 pp.5-27 (2020) : 5.

Jinho Jeong, Siqi Chen, Geesun Lee. The Effect of US-China Trade War on the US and Chinese Stock Markets. 2020; 27(4), 5-27. Available from: doi:10.18107/japs.2020.27.4.001

Jinho Jeong, Siqi Chen and Geesun Lee. "The Effect of US-China Trade War on the US and Chinese Stock Markets" Journal of Asia-Pacific Studies 27, no.4 (2020) : 5-27.doi: 10.18107/japs.2020.27.4.001

Jinho Jeong; Siqi Chen; Geesun Lee. The Effect of US-China Trade War on the US and Chinese Stock Markets. Journal of Asia-Pacific Studies, 27(4), 5-27. doi: 10.18107/japs.2020.27.4.001

Jinho Jeong; Siqi Chen; Geesun Lee. The Effect of US-China Trade War on the US and Chinese Stock Markets. Journal of Asia-Pacific Studies. 2020; 27(4) 5-27. doi: 10.18107/japs.2020.27.4.001

Jinho Jeong, Siqi Chen, Geesun Lee. The Effect of US-China Trade War on the US and Chinese Stock Markets. 2020; 27(4), 5-27. Available from: doi:10.18107/japs.2020.27.4.001

Jinho Jeong, Siqi Chen and Geesun Lee. "The Effect of US-China Trade War on the US and Chinese Stock Markets" Journal of Asia-Pacific Studies 27, no.4 (2020) : 5-27.doi: 10.18107/japs.2020.27.4.001