The Stock Connect to China
As a bridge between Chinese mainland and international financial markets, the Stock Connect program allows investors on both sides to gain mutual access. By analyzing how cross-border flows respond to macro-related shocks, we show that compared with possibly homemade foreign investors, genuine foreign investors are more likely affected by the U.S. monetary shocks, the exchange rate risk, the U.S. market performance as well as the cross-market valuation disparity. The paper highlights the importance of profiling different groups of cross-border participants over market integration.
We are grateful for financial support from the Becker Friedman Institute China. We thank Jianfeng Yu, Zhuo Chen and Antonio Coppola (discussant) for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.