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This paper seeks to explore the relationship among the large declines in China’s stock market and stock markets in the United States, the United Kingdom, Japan, and Hong Kong, and to forecast future large declines in China’s stock market. We apply mutually exciting marked Hawkes processes—where the occurrences of large declines are regarded as events whose magnitudes follow generalized Pareto distributions—to study the interaction between the different stock markets. We find that these interactions are asymmetric. The occurrences of large declines in the Chinese stock market will stimulate declines in the United States and the United Kingdom, and especially in Japan’s and Hong Kong’s stock markets. However, only large declines in Hong Kong’s market have a substantial influence on the occurrence of big declines in China’s market. Finally, we try to predict the time of occurrence of the next major decline in China’s stock market using information from our empirical results. [ABSTRACT FROM PUBLISHER]

With the RMB becoming the fifth international payment currency and its inclusion in the SDR currency basket, coupled with the opening of China's capital market, RMB-related exchange rates have attracted increasing attention because of China's RMB internationalization strategy. Using the DCC-GARCH model, we investigate how domestic (China) and international (USA, EU, UK, and Japan) policies and situations, including RMB internationalization, U.S. QE, European Debt Crisis, Brexit, and Abenomics, influence co-movement of the USD/CNY and SDR/CNY exchange rates from 2010 to 2017. We analyze the co-movement and provide explicit explanations for distinct areas (unrelated, long-term negative, and abruptly positive co-movement areas). Further, we find that RMB-related exchange rates remain largely influenced by domestic policies, while because of China's opening-up policies they are also influenced by the international situations. Both US and EU policies exert a remarkable influence, but the effects of UK and Japan policies are decreasing. [ABSTRACT FROM AUTHOR]