Analysis Of Co-Movement Between Chinese Stock Market And U.S. Stock Market

According to international finance globalization, Major international stock markets appear together rise or together down, so global investor attention to Co-Movement in stock market. The Co-movement is found not only in U.S., Japan, U.K and German in the advance country but also Korea, Singapore and Mexico in the Emerging Market.Specially, this study focuses on empirical test. This Thesis examines the stock return and volatility co-movements between China stock market and U.S. stock market, analyzing the phenomenon, the dynamic evolving process and the reason. The main results are as follow.First, This thesis investigates the stock return co-movements between stocks in the China and U.S., This study utilizes Vector Auto-Regression (Granger Causality Test, Impulse Response Function, Variance Decomposition) to investigate stock return co-movements between stocks in the China and U.S., We found that 1) From Granger Causality Test stock return in each index, we found that the S&P and NADAQ index have significant predictive power over the China B share market (Shanghai B and Shenzhen B). But China B index have not significant predictive power over the U.S. stock market. Also, we found not exit co-movement between China A share market and U.S. stock market. 2) From Impulse Response Function, Variance Decomposition, we found that the impact U.S. stock on the China B share market is greater than China A share market. These results are consistence with those of the Granger Causality results.Second, This study investigates whether mean and volatility co-movement between China and U.S. stock market. We employ EGARCH model to test the conditional mean and volatility co-movement between China and U.S. stock market. We found that 1) U.S. stock returns affect China stock returns but not vice versa. U.S. stock market only affects stock prices in China. 2) U.S. stock volatility affect Shanghai stock volatility but not vice versa. Also U.S. stock volatility affects Shenzhen stock volatility.Third, we had analysis reason for the co-movement between China and U.S. stock market. There are two the reason. One is Spill-over effect, the other is Contagion effect. We employ Two-stage Least squares analysis reason for the co-movement. We found that 1) The reason for the co-movement between China A share and U.S. stock is spill over effect. 2) The reason for the co-movement between China B share and U.S. stock is Contagion effect.Fourth, We investigates the pricing information between NYSE listed Chinese ADRs and their underlying shares by using MA (1)-GARCH (1.1). We found that 1) Contemporaneous Spillover model results: Both Underlying share and ADRs not only stock returns but also in the volatility of the returns response significantly to the change of each market. 2) Lagged Spillover model results: we found that it showed insignificant responses to mean between Underlying share and ADRs. But Underlying share volatility affect ADRs volatility but not vice versa.