An Empirical Study On The International Linkage Of China's Stock Market

The trend of global stock markets presents certain degress of correlation because of the liberalization of international trade, the internationalization of production, cross-market arbitrage and the consistency of expectation from international investors. In particular, the markets of developed countries may have long-term equilibrium and stable relationships. As one emerging market, China's capital market is also in the process of reform and opening-up. Besides, other systemtic arrangements are gradually carried out, such as the "going out" and "bringing in" mechanism. Under this background, this dissertation addresses the issue of the co-movement between China and international stock markets. The influencing factors of this co-movement are summarized, and in particular, how extreme condition like financial crisis, influenced the co-movement, is analyzed.This dissertation is based on correlation theories and literature reviews. First of all, an overall comparison between China and international stock markets is presented. After that, the volatility changes of these stock markets in three financial crises are analyzed to check the onshore-offshore consistency. Moreover, the volatility features of China's Stock Market in different policy stages are summarized. We try to verify whether the co-movement between China and international stock market becomes stronger along with the opening progress of China's Stock Market. This dissertation further discusses how the co-movement reacts to extreme conditions like financial crisis, followed by the final conclusion and outlook. The content arrangement is as follows:Chapter1, Introduction. This chapter formulates questions to be answered:what is the co-movement relationship between China's Stock Market and international stock market under the background of global economy integration and China's Stock Market internationalization? How and from what aspects financial crisis affects the co-movement? Besides, in this chapter, the research methodology and framework are presented. The innovations and limitations of the whole article are also summarized. Chapter2, the Basic Theory and Literature Review. Firstly, we introduce the definition, influencing factors and approaches of stock market co-movement. Secondly, we theoretically analyze the reason of co-movement from economic fundamentals and behavior economics prospective. The final part is a literature review covering the following three aspects:(1) the co-movement between world stock markets;(2) co-movement between China's Stock Market and international stock market;(3) co-movement between different indexes of China's Stock Market.Chapter3, the Facts and Features of China's Stock Market:Facts and Features. This chapter introduces the development status and internationalization progress of China's Stock Market. Secondly, this chapter described the volatility features of domestic and foreign stock market in three financial crises. In each crisis, the period is divided into three phases. In each phase, the volatility changes of international market are summarized to verify the consistency of China and international market. Finally, the description of return and volatility co-movement between China and international stock market is presented.Chapter4, Analysis of Co-movement and Case Study with Opening Policies. The chapter presents the co-movement analysis of China and international stock market in different stages of internationalization. Secondly, how the international stock markets affect opening price and closing price of China's Stock Market and vice versa are illustrated. Finally, detailed analysis of influencing factors is presented to provide in-depth explanation to empirical study results.Chapter5, Financial Crisis, Risk Impulse and Dynamic Inspection. This chapter illustrates how China's Stock Market interacts with international stock markets under extreme circumstances. For instance, we analyze the return and volatility co-movement between China and international stock markets before and after the U.S. financial crisis from both static and dynamic perspectives. Moreover, the characteristics of the co-movement changes in various stages after the outbreak of the subprime crisis are presented.Chapter6Co-movement Change, Influencing Factors and Financial Security. Firstly, this chapter summarizes the empirical conclusions in chapter3,4and5. Secondly, the features of co-movement change in different stages are compared. Finally, the external and internal influencing factors to the co-movement changes are illustrated.Chapter7, Conclusions and Policy Recommendations. The conclusions of the co-movement between China's Stock Market and international stock markets are presented. After that, recommendations from the prospective of regulators and investors are proposed respectively. Finally, we conclude the article and point out the future research directions. The conclusion suggests that the co-movement between China's and international stock market is raised up with the opening of China domestic stock market. However, the co-movement correlation is still low and no long-term stable relationship has been formed. Under extreme circumstances like financial crisis, the co-movement between China's Stock Market and international stock market strengthens substantially. Qualitative analysis indicates that financial crisis influences co-movement through both worsening global economic fundamentals and financial markets spread. Co-movement is a double-edged sword. When the financial market is stable, it is beneficial for the development of domestic securities market. The domestic capital can have global allocation to reduce the portfolio risk and the inflow of oversea capital can also improve the efficiency of the domestic stock market. When it encounters crisis, effective management and good allocation of resources in international markets are required to prevent international speculators from taking advantages of China's Stock Market.