Research On Information Transmission And Integration Process Of The Stock Markets

The 21st century is the information age, and the availability of perfect information is a determinant to dominant and occupy the market. The article studies the domestic and international stock market integration from the national perspective of the market information flows when insider trading occurring in the AB stock market and the international perspective of information flows between Chinese and the U.S.A stock market under the sub-prime crisis.Firstly, this paper testifies the integration of Chinese A-B Share Market using the relationships of information transmission in insider trading. Publishing the protocol of shareholding system transformation indicates that extra profits of stock will be larger than 5% in the time window of this event. The stock price will not change apparently on the publishing day through proving the existence of insider trading using non-parameter sorting method. Insider trading makes the information be reflected in share price before the publishing and the isolation of two markets makes that they have different sensitivities to information. The transmission direction and process of insider trading information between A-B share market will be proved using VAR regressive model. Insider trading makes the information transformed from A Share to B Share. Because the lagged four bands of A-share market price volatility has significant explanatory power to the b-share market volatility, the result shows AB stock markets don't ingrate very well.Sub-prime crisis brings a lot of opportunities to China while making a strong impact on China economics. It enhances China's international status and internationalize the capital market rapidly. Then this paper analysis China's stock market integration into international stock market which is represented by America. Stock market can't represent all the overnight information in the opening price. This paper deals with the delay of absorbing the information through adjusting the rate of return in stock's opening and close and then measures the integration of China's and America's stock market using the rate of return adjusted. It needs about 30 minutes before SSE Composite Index can represent the previous market information completely, so we set the index price of 30 minute after open as the"open price"to reflect the information absolutely. S&P500 index needs about 60 minutes to represent the previous market information completely, so we set the index price of 60 minute after open as the"open price"to reflect the information absolutely. Assuming the adjusted overnight rate of return to be interpreted variable and the adjust rate of return to be interpret variable, VAR-GARCH model is established, and the coefficients of day-time return and volatility show the effect of information transmission of return and volatility between markets. In the view of volatility, New York stock market has heavy impact on Shanghai stock market and 15% of Shanghai stock market's index can be predicted by America's domestic stock market's previous information. Shanghai stock market can't reflect the New York stock market's return completely, but it can interpret the volatility better. 13% of the S&P500 open price index can be predicted by the American market's previous information.