Empirical Study On Contagion Effect Between Chinese And American Security Market Under U.S. Subprime Crisis

U.S. subprime mortgage crisis was broken out in April 2007, which quickly spreaded to other countries and regions through various channels, leding to major global crisis rarely seen in history. In this context, the researchers focued on the contagion effect of financial crisis once again。As the financial crisis frequent rise and the devastating impact was growing, causing panic in the market and even affecting economic and political stability in one country, so how to control the contagion of the financial crisis has become the world's common problems.With the deepening of China's economic openness, the Chinese economy in the world economy and the degree of globalization, there are close economic ties between China and the U.S.,therefore, once the U.S. economy getting into crisis will spread to China.Studying the contagion effect of U.S. stock market under crisis have important instructive meaning on China's financial market risk management.Firstly, reviewing and commenting financial contagion from the empirical studies had been conducted, and we got the definition of financial contagion in detail. Secondly, we introduced the background of the subprime mortgage crisis and the possible reasons for the outbreak leding to the financial crisis.on the basis,we also analysised the effect that sub-prime crisis on China and other developed countries. And through related changes before and after the crisis to study the existence of China and the U.S. stock market financial contagion.Thirdly, This paper introduces the copula theory and its relevance measure in the application. And copula theory is applied to empirical research of the article.The traditional studies in dependece is the use of Pearson linear correlation between the financial markets, which is not suitable for non-linear changes. Cointegration analysis, Granger test and the multiple correlation based on the GARCH model had a big error in the correlated analysis, so now widely used method is non-linear relationship analysis to test financial contagion, that is associated with the copula method. As related non-linear and non-symmetrical statistical theory, Copula theory has been widely applied to the correlation analysis in financial markets,. In the empirical part, stock market price index data were selected before and after the outbreak of the subprime mortgage crisis ,if the correlation increased significantly after the crisis, which proved the existence of financial contagion.In copula function,we used non-parametric kernel density estimation and CML method to estimate the parameters,which did not assume that the marginal distribution of financial assets subject to a specific case of the distribution. Commonly used in ML estimation and IFM estimates must assume that the marginal distribution of assets subject to a specific distribution,so there were large errors in copula parameters estimated. The CML method is different,we need not make assumptions on the marginal distribution, but to use the empirical distribution of the assets changing the return series into a new sequence, and then use the maximum likelihood to estimate the parameters in the copula function and calculate the corresponding rank correlation coefficient, draw conclusions.Finally, the conclusions of the article including:the U.S. subprime crisis has infected the China Stock Market, but transmission phenomenon is not significant; China's foreign investment and overseas listing of Chinese enterprises may be the most important way to contagion, trade links and other means of contact play limited role fiancial contagion in China. According to the causes of the subprime crisis and possible mode of transmission, combined with the actual development of our economy, I offer a number of recommendations from the macro level and micro level, respectively,expecting make some contribution in China's financial market risk management .At the macro level, including:timely adjustment monetary policy, reasonablely opening capital market, reforming economic structure, optimizing the structure of foreign exchange reserves and flexible exchange rate system, strengthen financial supervision and international financial cooperation; At the micro level,including:the banking sector strengthen risk management, financial markets development credit derivatives carefully, personal investors should acquire a certain amount of information, institutional investors allocate the assets rationally.