is general might be hard to reject. Our results of the test is as expected, both series possess a unit root. On the basis of having two (1) series, we then employ the Durbin-Watson test to investigate the cointegration relationship. Then I found valid evidence that cointegrating relations have yet emerged between the SSE and S&P 500 markets. A possible explanation of this result could be that cointegration is long run property of variables. In the short run, the variables can be moving in different ways, driven by dynamic processes. However, cointegration ties the variables together in the long run. Also, the Chinese stock market is a bit special as being not absolutely efficient where government intervention plays an important role. “With the party cheerleading the market’s inexorable rise, it became even easier to imagine that the government was, in effect, declaring an informal debt obligation on the stock market’s future – essentially covering any bets with its own considerable assets. How could you lose? And so the bubble grew and grew: price-to-earnings ratios for Chinese stocks averaged an astounding 70-to-1, against a worldwide average of 18.5 to 1; the value of the A-shares inside China grew to be nearly double the equivalent shares of the same companies on the Hong Kong exchange. Ordinary Chinese people had become so intoxicated by bull-market euphoria that stories began to proliferate about people leaving their jobs, and even their families, to become day traders, often using funds borrowed from high-interest rate “shadow banks” or loans taken out against their homes.”- from the Guardian. However, a reasonable prediction would be that globalization is an inevitable trend and in the foreseeable future the Chinese stock market would be further integrated with the world financial system.
Maths Puzzle 2 Find all possible solutions to the ‘word sum’ on the right. Each letter stands for one of the digits 0−9 and has the same meaning each time it occurs. Different letters stand for different digits. No number starts with a zero. O D D
+ O D D E V E N
13
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