The Empirical Study Of Transmission Mechanism About The International Financial Volatility To China's Security Markets

Preventing the impact of international financial risk factors on demestic market is the key strategy for fianacial stability. With the rapid growth of world economy, economic linkages amang nations are becoming more closely, international capital flows more frequently and the spreading of the information more fasting. Global financial market integration resulted form above these. This paper takes an empirical test on the comovement of demestic and foreign stock markets, then focus on the core problem——how the international financial risks comes into China's stock market? The core structure of the thesis is following:Chapter One, inturduces the background and implication of the research, as well as basic concept, organization structure. and major difference.Chapter Two, mainly reviews the literatures related to the stock market risk., and then we peopose the theoretical analysis frame and hepotheses. In the part, we think there are two ways for international stock market volatilities to be carried into China: 1) the volatilities spillover directly. Stockholders in China's market are so deeply influenced by the sharpely dorp of outside markets that they are emotionally creazy to clear their positions. 2) Hot money (international short-term capital) across the world flows into domestic stock market, and bobles come up. Once international speculators find there is a crisis somewhere, they will immediately flows out, leading to volatility in local markets.Chaper Three, takes an empirical test on the comovement of local and foreign markets. According to the result of Granger Casuality test, we find that, U.S. New York stock market can Ganger cause the price changes of China's market, and China's also have an effect on U.S. and U.K. stock markets. By the Impulse Response Function, we conclude that China's market less closely related to developed countries'compared with Japan.Chapter Four, considers the impact of the exchange market, and eomploys the MGARCH Models (DVECH and BEKK) to ensure whether the changes in RMB/USD exchange rate are one way for transmitting the international Volatilities. By the empirical research, we imples that: 1) Under various assumptions, the correlations of U.S. and China's stock market respectively with the exchange rate change over time; 2) Both under t-distribution and normal distribution, the risk of the exchange market has an substantial effect on the Shanghai stock market; 3) the volatility of the exchange market is significantly lower than sock markets. 4) the risks in stock markets (China and U.S.) and the exchange rate can affect each other.The last part contains conclusions based on the above analysis. Our main views are : 1) Comovements amang China's and international major stock markets exist significantly, and our demestic market not only are influenced by foreign markets, but also has an effect on them too. 2) the exchange rate plays an important role in the transmission mechanism about the international financial volatility to china's security markets.