This paper investigates whether foreign capital is smarter money using multifractal cross-correlation analysis (MFCCA) and nonlinear Granger Causality test. Using multifractal detrended fluctuation analysis (MF-DFA) method, we find that time series of stock returns, foreign-capital inflow from Shanghai–Hong Kong Stock Connect (SHKSC), and domestic-capital flow (proxied by margin-trading activities capital) exhibit strong multifractality. In addition, MFCCA results show that there exists a strong persistent cross-correlation between stock returns and foreign-capital inflow, but anti-persistent cross-correlation between stock returns and domestic-capital flow. Moreover, using nonlinear Granger Causality test, we find that foreign-capital inflow is the granger cause of stock returns. Our findings provide empirical evidence that foreign-capital inflow is positively associated with future stock returns, i.e., foreign capital is smarter money.

中文翻译：

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外资更聪明吗？沪港通的多重分形证据

本文使用多重分形互相关分析 (MFCCA) 和非线性格兰杰因果检验来研究外国资本是否是更聪明的货币。使用多重分形去趋势波动分析 (MF-DFA) 方法，我们发现股票收益的时间序列、沪港通 (SHKSC) 的外资流入和内资流动（以保证金交易活动资本为代表）表现出很强的多重分形性。此外，MFCCA结果表明，股票收益与外资流入之间存在很强的持续互相关，而股票收益与内资流入之间存在反持续互相关。此外，通过非线性格兰杰因果检验，我们发现外资流入是股票收益的格兰杰原因。