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On Co-movement For China And World's Stock Markets As China's Capital Market Opening Up

Posted on:2011-11-26Degree:MasterType:Thesis
Country:ChinaCandidate:W ChenFull Text:PDF
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In the backdrop of global economy integration, internationalization and linkage of stock market is an inevitable trend of global economic development. With the opening and development, China's capital market becomes an important part of global capital markets. In order to improve stock market efficiency, circumvent risks arising from international market correlation, promote the healthy development of China's stock market, therefore, it is necessary to study the co-movement to find resolutions against stock market volatility and the risks associated with markets co-movement, to puts forward some constructive suggestions.This paper uses Granger causality test and DCC-MVGARCH model to analyze the leading relationship and dynamical correlation among China mainland, Hong Kong, the USA, England stock markets from December 26,1996 to April 30,2009. The sample was divided into four sub-phases according to the degree of China's capital markets opening.According to empirical analysis, we find:(1)from the first phase to the third stage, the Chinese mainland market is basically in isolation. Entrying into WTO and QFII implementation can not effectively promote the process of the internationalization of China's stock market. In the fourth stage, reform of RMB exchange rate strengthens the linkage between China and foreign stock market gradually, but far away from the integration. (2)Numerous of large state-owned enterprises who issued H shares in Hong Kong return to A-share market as blue chip, increased the co-movement between China stock market and Hong Kong stock market rapidly. (3) Although the linkage between domestic stock market and the U.S., the UK stock market has been enhanced, but because of the difference such as capital controls, investment concepts,the related coefficient with the United States, Britain and other mature markets are still at low degree. (4)Compared to three previous sub-periods, in the fourth sub-periods, there is a co-movement relationship between China mainland and world stock markets. Although this consequence of the co-movement is not significant, the trend of one of the four markets can be inferred according to the other three markets.
Keywords/Search Tags:Stock market co-movement, Stock market return, Granger causality, DCC-MVGARCH model
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