A Tale of Three Stock Markets: Timing Between Hong Kong, Shanghai and Shenzhen

This paper looks at one relatively less‐visited issue in market timing: switching investments on common stocks between different stock markets, namely, “intermarket timing”. By employing the stock price data for the period of 1992‐2002 from a developed market, Hong Kong, and two emerging markets, Shanghai and Shenzhen, this paper examines potential gains and the required predictive accuracy for intermarket timing between Hong Kong and Shanghai, and between Hong Kong and Shenzhen from Hong Kong investors’ perspective. Potential gains could be obtained from such timing strategy, and the non‐high minimum forecasting ability required for successful timing is fairly attainable for Hong Kong investors, even after taking into account the assumed transaction costs.