We analyze the effects of a recent financial reform that enables cross-market invest-ment between Hong Kong and Shanghai stock exchanges. Using a vector error-correction model, we found that the reform announcement considerably narrows the equilibrium level of price disparity and strengthens the...

In spite of the popularity of model calibration in finance, empirical researchers have put more emphasis on model estimation than on the equally important goodness-of-fit problem.This is due partly to the ignorance of modelers, and more to the ability of existing statistical tests to detect...

In spite of the popularity of model calibration in finance, empirical researchers have put more emphasis on model estimation than on the equally important goodness-of-fit problem. This is due partly to the ignorance of modelers, and more to the ability of existing statistical tests to detect...