Capital Market Liberalization and Equity Market Interdependence

This paper uses tests drawn from the literature on financial market contagion measured
by changes in higher-order comoments to establish the patterns in the interdependence
between equity markets in Shanghai and Shenzhen with Hong Kong as mainland China
liberalized their capital market. On the announcement of the opening of the Shanghai
market correlations rise, but subside by the launch. Following the launch changes in
coskewness, cokurtosis and covolatility emerge. The liberalization process is complete
by mid-September 2016.