The Mergers & Acquisitions Market Trends and Stock Market of China

Abstract

Since the 90s of last century, there is a substantial increase of the Chinese equity market and M&A market. In order to explain the phenomenon of the rapid development of Chinese M&A market, the paper introduced EMD method to divide the data into a number of cycle terms, and tried to use the stock market volatility information to explain the factors of Chinese M&A market. Specifically, M&A market time series data and the Shanghai Composite time series data are decomposed into multi-scale time series using EMD method. Three key components of high-frequency, low-frequency items and trends items, respectively, use Pearson correlation test of the corresponding component. Results showed that trends items of M&A market and stock market are highly correlated, the low-frequency items moderate correlation, and high-frequency items completely unrelated. The stock market index series carry sufficient information of macroeconomic, government policy and investor behavior information, so analysis of the factors China’s M&A market could be discussed indirectly through stock market volatility. The findings indicate that sustained growth of China’s macro economy is the main cause of China’s M&A market development, and industrial restructuring, government policies and short-term capital markets irrational investment behavior are important factors of China’s M&A fluctuations.
Key words: M&A market stock volatility; Empirical mode decomposition (EMD)