Scale-dependent capital flows and systemic risk: Multifractal evidence from Mainland China–Hong Kong Stock Connect

This study examines the multifractal and asymmetric dynamics of cross-border capital flows under the Mainland China–Hong Kong Stock Connect system. Using asymmetric MF-DFA and MF-DCCA on daily data from 2016 to 2024, we document nonlinear scaling, directional asymmetry, and scale-dependent patterns in both capital flows and market returns. The results reveal a contrast between price dynamics and capital flows across market conditions: while return series tend to exhibit more compressed multifractal spectra in downward states, capital flows and their cross-market interactions display broader spectra, indicating greater dispersion in scaling behavior. In addition, differences between Northbound and Southbound channels suggest heterogeneous flow–return interactions across regimes and scales. These findings are robust across alternative detrending methods, and are further supported by shuffled and surrogate data diagnostics. Overall, the results highlight the importance of scale-dependent perspectives in understanding the interaction between capital flows and market dynamics in partially integrated financial systems.