Tail Dependence between Mainland China and Hong Kong stock markets

Despite growing financial integration, whether mainland Chinese and Hong Kong stock markets exhibit asymmetric and negative tail dependence remains understudied. Using daily returns of the Shanghai Composite Index and the Hang Seng Index, we estimate marginal distributions with ARMA-GARCH models and model joint tail dependence with a hybrid rotated Gumbel copula that incorporates 0 ∘ , 9 0 ∘ , 18 0 ∘ and 27 0 ∘ rotations. The results show that tail dependence is dominated by positive co-movement, with a larger contribution from lower-tail positive dependence and slightly stronger dependence intensity in the upper tail. Negative tail dependence is economically negligible. These findings remain robust and have implications for cross-market portfolio management and systemic risk prevention.