An Empirical Study Of The Co-movement Between China And Other Five Stock Markets

Since the 1990s, the international financial markets are full of changes, and thousands of financial events appear in a variety of ways. Developed financial entities no longer affect developing financial entities unilaterally. The developing financial entities can affect the developed financial entities in a same way. When those financial entities face the same risk factors, their stock markets display co-movement characteristics.Through studying on co-movement of several stock markets, we can evaluate the risk diversification capabilities of using several different stock markets. So, the co-movements of stock markets have become an important issue of financial area. With the upgrading of China's economic status, the financial relationship between China and worldwide financial markets must become more intensified. In this situation, research on China's financial markets will have theory and practice meaning.After the main introduction of abroad and domestic research about co-movement of stock markets, this paper described the opening and developing process of China's economy and stock market. In order to obtain the detail co-movements between China and other five stock markets, I divided the index in four parts. The econometric methods used in this paper include Cointegration test, ECM model etc.The research results demonstrate that the average correlation between China and world stock markets improves significantly, and exhibits some convergence trends. Cointegration also exists among those stock markets entirely after the share reform. From a regional perspective, the stock market of China mainland has certain influence over some other Asian stock markets. Based on the above analysis, this paper proposes some possible ways which can improve the environment of China's stock market and stimulate the cooperation between China and other countries.