The Impact of QDII Scheme on China: An Empirical Test of Portfolio Theory

Fan, Ting Ting (2008) The Impact of QDII Scheme on China: An Empirical Test of Portfolio Theory. [Dissertation (University of Nottingham only)] (Unpublished)

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Qualified Domestic Institutional Investors (QDII) is a transitional policy specially designed for emerging countries where the capital account is not allowed to flow freely and the currency cannot be converted freely. In China, the QDII scheme allows Chinese citizens to invest in overseas equities markets, with designated foreign currencies, through qualified institutional investors. This scheme is proposed by the Hong Kong Special Administrative Region's government in 2001 as a way of boosting the region's economy. By learning the experience from other emerging markets, such as Taiwan, Korea, India and Brazil, QDII scheme is finally launched in April, 2006 in China. So far, QDII scheme is implemented just over two years in China, so the significances it brings to China�¢����s economy and its final achievement in China are still a big concern for Chinese policy makers and investors. As a coin has two sides, QDII scheme has its important role, but there are also many problems.

This project is aimed to test the subsequent impacts that QDII scheme brings to China by making a thorough study about the securities investment theory, especially, the portfolio theory, Sharpe ratio, and correlation between different stock markets�¢���� index. The results show that the QDII scheme can help Chinese investors to realize risk reduction through investment diversification, reduce RMB appreciation pressure, be a win-win measure favorable to China mainland and Hong Kong, promote the integration of domestic capital market with the international capital market, mitigates the pressure of illegal capital flight, has little impacts on the Chinese stock market in the short-run, cause market slump to some extent. Together with these evidences, it can be confirmed that the implementation of QDII will further conduce to the stable, health, and ordered development of the securities market in China.

Keywords: capital control, portfolio theory, Sharpe ratio, correlation, Chinese stock market.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 20 Sep 2008
Last Modified: 28 May 2016 22:25

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