The Change Of The Correlation Between Chinese Mainland Stock Markets And Other World Stock Markets And Its Impact On Portfolio Diversifications

Globalization of economic activities and financial liberalization have accelerated themovement of funds and expended the international trade, which has prompted the interactionbetween different capital markets. With the increasing correlation between international politicaland activities, investors not only consider domestic factors but also international factors whenthey make investment portfolio.The integration of international capital market has been a tremendous tendency within theinternational financial industry since 1980s; With China's entry into the WTO the internalfinancial market would gradually loosen its control and stock would come to the cross-listingwithin the world; in Dec.2002, China opened QFâ…¡, additionally, QDâ…¡is also in pilot phase, so itis not sufficient for investors to reduce portfolios' risks via international portfolio diversification.Further more, in European countries; the international diversity of investment portfolio hasexperienced long-term tradition, although it maybe a relatively new concept in the US and Japanyet the risk-reducing via international portfolio diversification has become a tendency. China asa member of the WTO, the investors should reduce risk via international portfolio diversificationto raise portfolio's return.This study using China stock markets and some world stock markets as samples, analysisto review the Chinese and international relativity change so as to explore if correlationcoefficients of mainland's stock markets and other international stock markets into 3 phases israised and thereby mainland investors' international portfolio diversification of scatteredinvestment is affected with the expansion of opening up. And then according to Markowitzportfolio theory, calculate each phase's effective portfolio, so as to test if Markowitz portfoliotheory is feasible for mainland's investors to carry out international portfolio diversification withreducing the risk of the portfolio via international portfolio diversification to raise portfolio'sreturn.