Testing the Integration of US and Chinese stock markets in a Fama-French framework

The Chinese economy has undergone spectacular growth in recent decades, and as part of an ongoing liberalisation process is now opening up its stock markets to greater foreign investment. This paper explores the integration and segmentation between the US and Chinese stock markets. Our analysis extends the work of Jorion and Schwartz (1986) to a Fama-French framework using both Chinese and US Fama-French factors. Despite the ongoing liberalisation process in China our results support the segmentation hypothesis.