Analysis On Segmentation Of Stock A Market And Stock B Market In Shanghai And Shenzhen Through Information Flow

The segmentation of stock A market and stock B market in China is unique in the world andthere is no other example. It should be attributed to the system design factor. In February of 2001,stock B market began to allow domestic investors to participate, which would put profoundinfluence on the segmentation of stock A market and stock B market.This article aims at the empirical analysis of the segmentation of stock A market and stockB market in Shanghai and Shenzhen, choosing the empirical analysis of the long-termcoordinating relationship between stock A index and stock B index in Shanghai and Shenzhenstock markets as the first step, then choosing information flow as explanatory factor as theintrinsic mechanism connecting stock A market and stock B market in Shanghai and Shenzhenfrom the microscopic angle, decomposing information and describing the route of informationflow. This article divides into 3 chapters.Chapter 1 briefly introduces stock market segmentation, describes and analyzes thecharacteristics of stock market segmentation in China, then summarizes foreign and domestictheoretic achievements about stock market segmentation, refines theoretic framework and clue,constructing clear analyzing coordinate system for further empirical analysis.With co-integration theory put into application, Chapter 2 makes empirical analysis on thelong-term equilibrium relationship between stock A index and stock B index in Shanghai andShenzhen stock markets. The result supports the conclusion that after stock B market began toallow domestic investors to participate, the long-term equilibrium relationship between stock Aindex and stock B index in Shanghai and Shenzhen stock markets has strengthened and thesituation of segmentation of stock A market and stock B market has improved.Chapter 3 takes information flow as intrinsic factor connecting stock A market and stock Bmarket in Shanghai and Shenzhen, by applying GARCH (General Autoregressive ConditionalHeteroscedasticity) model, VAR (Vector Auto-Regression) model and Granger causality testdecomposes information and searches the route of information flow between stock A market andstock B market in Shanghai and Shenzhen. The result supports the conclusion that after stock Bmarket began to allow domestic investors to participate, the information flow between stock Amarket and stock B market in Shanghai and Shenzhen has strengthened. Then the segmentationof stock A market and stock B market in China should be attributed to the system design factor.