Owing to the liberalisation of financial markets, the impact of international capital flows on the Chinese stock market has become substantial. This study investigates the effects of economic policy uncertainty (EPU), geopolitical risk (GPR), consumer sentiment (CCI), macroeconomic fundamentals (MECI), and money supply (M2) on the correlations between the stock and exchange rate markets. The negative correlation between these two markets has become more pronounced in recent years. Moreover, EPU, GPR, CCI, and MECI negatively impact long-term stock-exchange rate correlations, while M2 has a positive impact. Portfolios of stock-exchange rates effectively reduce risk, especially when considering structural breaks.

The effects of skyscraper development on surrounding firms’ innovation in China is assessed in this paper, and empirical results show that skyscraper development significantly promotes the innovation of firms within 1 km of skyscrapers. However, such effect only exists around very tall skyscrapers in large cities. This means that skyscraper development in small cities often is unfit for the economic fundamentals of these cities, which may weaken the positive externalities generated by skyscrapers. The mechanism analysis in this paper shows that increased surrounding population density brought by skyscraper development and knowledge sharing between firms surrounding the skyscrapers and other firms in the same city are the main paths through which skyscrapers affect innovation.

It has been long that literature in financial academics focuses mainly on price and return but much less on trading volume. In the past twenty years, it has already linked both price and trading volume to economic fundamentals, and explored the behavioral implications of trading volume such as investor’s attitude toward risks, overconfidence, disagreement, and attention etc. However, what is surprising is how little we really know about trading volume. Here we show that trading volume probability represents the frequency of market crowd’s trading action in terms of behavior analysis, and test two adaptive hypotheses relevant to the volume uncertainty associated with price in China stock market. The empirical work reveals that market crowd trade a stock in efficient adaptation except for simple heuristics, gradually tend to achieve agreement on an outcome or an asset price widely on a trading day, and generate such a stationary equilibrium price very often in interaction and competition among themselves no matter whether it is highly overestimated or underestimated. This suggests that asset prices include not only a fundamental value but also private information, speculative, sentiment, attention, gamble, and entertainment values etc. Moreover, market crowd adapt to gain and loss by trading volume increase or decrease significantly in interaction with environment in any two consecutive trading days. Our results demonstrate how interaction between information and news, the trading action, and return outcomes in the three-term feedback loop produces excessive trading volume which includes various internal and external causes. Finally, we reconcile market dynamics and crowd’s trading behaviors in a unified framework by Shi’s price-volume differential equation in stock market where, we assume, investors derive a liquidity utility expressed in terms of trading wealth which is equal to the sum of a probability weighting utility and a reversal utility in reference to an outcome. JEL Classifications: G12, G02, D83 （长期以来，金融学术领域里的文献只注重价格和收益率，却较少研究交易量。在最近的二十年里，金融学术文献已经开始研究价格和交易量两者与经济基本量之间的相互关系，并且探讨交易量的行为内涵，例如投资者对风险的态度、过度自信、不同观点以及关注程度等等。然而，我们还是对交易量的认识知之甚少。本文根据行为分析，用交易量概率来表示市场群体的交易频率，并且通过我国股市来实证检验涉及交易量与价格之间不确定关系的两种适应性假说。实证结果表明：市场群体在每日交易的时间窗口内除了采用简单的经验法则之外，同时还采用有效的适应性方式来从事股票交易，并且逐步倾向于形成一个结果和认同的资产价格；无论该资产价格是否明显地被高估或低估，市场群体在相互作用和竞争的过程中往往能够形成这样一个稳态的均衡价格。这表明了资产价格不仅包含了基本价值同时还包含了非公开信息、投机、情绪、关注、赌博和娱乐等价值。此外，在任意两个连续交易日之间，市场群体在与市场环境的相互作用过程中，通过交易量的增加或减少来有效地适应盈亏。我们的研究结果说明了在由信息、交易与收益结果三项构成的反馈环中，它们之间的相互作用是如何导致了过度交易的，这其中包含了导致过度交易的各种内外因素。最后，我们假设股票市场中的投资者是通过交易财富来产生流动性效用，它等于概率加权效用与相对于结果为参照系的反转效用之和，从而推导出Shi氏价-量微分方程，将市场动力学行为与群体交易行为协调在一个统一的框架体系。）

It has been long that literature in financial academics focuses mainly on price and return but much less on trading volume. In the past twenty years, it has already linked both price and trading volume to economic fundamentals, and explored the behavioral implications of trading volume such as investor’s attitude toward risks, overconfidence, disagreement, and attention etc. However, what is surprising is how little we really know about trading volume. Here we show that trading volume probability represents the frequency of market crowd’s trading action in terms of behavior analysis, and test two crowd’s trading behavioral hypotheses relevant to the volume uncertainty associated with price in China stock market. The empirical work reveals that market crowd trade in simple heuristics and efficient adaptation, gradually tend to achieve agreement on an outcome or an asset price widely on a trading day, and generate such a stationary equilibrium price very often in interaction among themselves no matter whether it is highly overestimated or underestimated, suggesting that asset prices include not only a fundamental value but also private information, speculative, sentiment, gamble, and entertainment values etc. In addition, market crowd adapt to gain and loss by trading volume increase or decrease significantly in interaction with environment in any two consecutive trading days. Our results demonstrate how interaction between information and news, the trading action, and return outcomes in the three-term feedback loop produces excessive trading volume which includes various internal and external causes. Finally, we reconcile market dynamics and crowd’s trading behaviors in a unified framework by Shi’s price-volume differential equation in stock market where, we assume, investors derive a liquidity utility expressed in terms of trading wealth which is equal to the sum of a probability weighting utility and a reversal utility in reference to an outcome. JEL Classifications: G12, G02, D83 (长期以来，金融学术领域里的文献只注重价格和收益率，却较少研究交易量。在最近的二十年里，金融学术文献已经开始研究价格和交易量两者与经济基本量之间的相互关系，并且探讨交易量的行为内涵，例如投资者对风险的态度、过度自信、不同观点以及关注程度等等。然而，我们还是对交易量的认识知之甚少。本文根据行为分析，用交易量概率来表示市场群体的交易频率，并且通过我国股市来实证检验交易量与价格之间不确定关系中关于群体交易行为的两个基本假说。实证结果表明：市场群体在每日交易的时间窗口内采用简单的经验法则和有效的适应方式来从事交易，并且总是逐步地倾向于形成一个结果和认同的资产价格；无论该资产价格是否明显地被高估或低估，市场群体在相互作用的过程中往往能够形成这样一个稳态的均衡价格，这表明了资产价格不仅包含基本价值同时还包含非公开信息、投机、情绪、赌博和娱乐等价值。此外，在任意两个连续交易日之间，市场群体在与市场环境的相互作用过程中，通过交易量的增加或减少来有效地适应盈亏。我们的研究结果说明了在由信息、交易与收益结果三项构成的反馈环中，它们之间的相互作用是如何导致了过度交易的，这其中包含了导致过度交易的各种内外因素。最后，我们假设股票市场中的投资者是通过交易财富来产生流动性效用，它等于概率加权效用与相对于结果为参照系的反转效用之和，从而推导出Shi氏价-量微分方程，将市场动力学行为与群体交易行为协调在一个统一的框架体系。)

We examine effects of capital structure management and misvaluation on the payment method in mergers and acquisitions. In a sample of 3,097 transactions, we find evidence both for leverage optimization and misvaluation as drivers for the decision to pay with cash or stock. Our evidence also shows that it is difficult to pay with overvalued stock unless justified by economic fundamentals. Few bidders try and often only succeed after going hostile. Paying with cash while capital structure optimization suggests stock payment is more common. These firms are reluctant to pay with undervalued stock and experience positive long-term excess returns.

In this paper, real and financial linkage is to be investigated. We focus on six typical stock markets after time zone effect taken into consideration. We select monthly annual CPI rate as transition variable in Smooth Transition Conditional Correlation CARR (named STCC-CARR for short) model to scrutinize interdependence among international stock markets. As it is testified, correlations among them are fluctuant with different inflation cycles and could not be ignored arbitrarily. The highest correlations come out between countries when both are in contractionary phase, while the lowest correlations do when both are in expansionary phase.

There is growing evidence that economic crises are transmitted across economies and equity markets. This motivates two questions. First, can the direction and magnitude of a country's stock market reaction during an extreme case ("contagion") be explained by economic fundamentals? Second, are there benefits of international diversification during times of widespread contagion among equity markets? We examine the reaction of major world equity markets to the 1997 Asian Crisis. In particular, we investigate the interrelationships among world equity markets, the factors explaining the different directions and magnitudes of countries' reactions to this crisis and the effectiveness of the global diversification of investment portfolios during financial crises. Our analyses provide evidence that is consistent with the correlations among world equity markets increasing dramatically during the period of the Asian Crisis. However, this effect is concentrated on a short period around the crisis. The benefits of international diversification may be obtainable, even when the period contains a worldwide financial crisis. We show that the productivity and interest rate macroeconomic variables, worldwide beta and the existence of derivatives trading are important in explaining the stock market returns during the Asian Crisis. The effect of the worldwide beta variable is particularly strong. Finally, the trade variables are insignificant, their influences being subsumed by interest rate and inflation macroeconomic variables. On balance, we interpret our results as supporting a rational view of the spread of an economic crisis to other markets.

This paper develops a model of private debt financing under inefficient financial intermediation. It suggests a mechanism that can generate the following sequence of events observed in the recent Asian crisis: A period of relatively low capital flow despite a steady improvement in economic fundamentals (capital inflow inertia), followed by a fast buildup of capital inflow, and ended with a large capital outflow and domestic credit crunch. Unlike other models requiring large movements in fundamentals or asset prices to explain a financial crisis, this model can exhibit large credit/capital flow swings with moderate changes in the economic and market environment.

An unparalleled feature ownership structures in China is the presence of non tradable shares (NTS). NTS represented a major hurdle to domestic financial market development for its negative effects on liquidity and market transparency. After some failed attempts, in 2005 the Chinese authorities have launched a structural reform program aiming at eliminating NTS. In this paper, we evaluate the stock price effects of the actual implementation of this reform in 368 firms. The NTS reform generated a statistically significant 8 percent positive abnormal return over the event window, adjusting prices for the compensation requested by tradable shareholders. Results are consistent with the expectation of improved economic fundamentals such as better corporate governance and enhanced liquidity.

Price and quantity are the two fundamental variables in the analysis of market interactions. Yet the study of financial markets has focused primarily on the behavior of asset prices and their relation to economic fundamentals. Much less attention has been devoted to the understanding of quantities such as trading volume. Only recently, there has been a growing body of work to link price {\it and} volume to economic fundamentals. In this paper, I review some of these work within a unified framework. I start by describing an intertemporal asset pricing model that explicitly models investors' trading motives, their optimal portfolio choices and the resulting equilibrium asset prices. I then examine the price-volume implications within the framework of the model. Finally, I discuss the results from the empirical analysis of volume and stock returns based on the data of the U.S. stock market. The theoretical analysis together with its empirical support clearly demonstrate that volume and prices are jointly linked to the economic fundamentals, e.g., the risks of the assets and the investors' attitude toward them. Moreover, the behavior of volume is closely related to the behavior of prices and from which we can learn a great deal about the prices as well as the economic fundamentals.