A Research On Equity Market Opening And Stability

From 1980s, emerging equity markets in the world have been swiftly developing. The opening of emerging equity markets make it possible to use foreign capital for compensating domestic capital shortage. Meanwhile, however, the markets may have to withstand large-scale foreign capital impact in this circumstances, which will seriously intensify the fluctuation of the equity markets. Does opening of markets have connection with volatility? How to relieve mutual influences? It is very meaningful to make further research in this field.Till now, many scholars have made research on the income changes of equity markets and economic volatility because of the opening of markets. But the relations of markets' opening extent and stability have little related research. Therefore, this paper will divide the emerging markets into different kinds, and then make a further study on the relations of markets' opening extent and stability.Based on the previous research, this paper takes nine emerging equity markets as the research sample, dividing them into three groups according to the opening extent of markets. At the same time, GARCH model is set up by ICSS method in order to analyze the influence of opening on volatility. The result indicates that it is not the opening of market but market imperfection and lack of supervision that can not held back the foreign capital impact. The conclusion is a very good support for the overall opening of emerging markets. With the liberalization of trade and freedom of exchange current account, it is necessary for China, as a typical emerging market, to open equity markets further. However, our country's equity market has a lot of problems nowadays: the quality of public company and supervision are not perfect; large price differences exist between A-share market and B-share market; QFII progress faces the problem of speculation which probably affects market volatility. It is unpractical to open Chinese equity market completely immediately. So in the end, this paper discusses the relations of Chinese equity markets' opening and fluctuation, and then puts forward a series of improvement measures to solve these problems.