Study On The Co-movement Of Mainland And Hong Kong Stock Markets Before And After Subprime Mortgage Crisis

Since 2007, the outbreak of united states subprime mortgage crisis led to the global economic slowdown, every country's financial market were impacted in different degree, the subprime mortgage crisis become the world's financial crisis, our mainland market and Hong Kong market were not immune. Through the research of whether mainland stock market and Hong kong stock market have co-movement and if they have co-movement, how this co-movement changes during the Subprime crisis. This article gives the suggestions for the healthy and stable development of our financial market.This article is based on the co-movement between the mainland stock market and Hong kong stock market, using theoretical and empirical methods, analyzed the cause of co-movement between the two markets. At the same time, this article has given some suggestions to investors, financial regulation and government. The full text is divided into five sections:The first section is introduction. It introduced the background, purpose, significance, research at home and abroad, frameworks and innovations. The second section introduces the evolution of the Subprime crisis, then analyzes the crisis's influence to China's mainland economy and Hong Kong's economy, from the stock market, real estate market and foreign exchange aspects.The third section is the theoretical analysis on the co-movement of mainland stock market and Hong Kong stock market before and after Subprime crisis. It elaborated the economic ties and the reasons of the co-movement between the two markets. The forth section is empirical analysis on the co-movement of two markets in two phases. The fifth section is the conclusions and recommendations to the co-movement between mainland stock market and Hong Kong stock market. Proposed we should enhance investors'education and protection, continued to strengthen financial oversight functions, strengthen the economic policies coordination and cooperation between mainland and Hong Kong.It used co-integration methods, Granger non-causality test, VAR impulse response and variance decomposition and error correction methods to test the co-movement change after the Subprime crisis, and concluded the co-movement is weakened after crisis.