A Study On The Comovement Between Shanghai And Shenzhen Securities Markets

With the global economic integration, the degree of dependence and influence among financial markets is increasing. Therefore, the securities markets show a kind of synchronous fluctuation. The analysis of comovement among securities markets becomes more and more important in the application of finance. Meanwhile, the problems such as the portfolio analysis, asset pricing and financial risk measurement, all involve comovement analysis. Furthermore, the comovement analysis has practical meaning since the frequent break-out of world financial crisis. Therefore, it is meaningful to understand the comovement relationship between Shanghai and Shenzhen securities markets, which could help investors have a better understanding of the characteristics of China's securities markets and improve its further development.This thesis starts with a detailed description of the overall development of China's securities markets. Then the comovement mechanism between securities markets is analyzed under the guidance of market segmentation theory, the market transmission theory, as well as the portfolio theory. Finally, based on the realistic situation of China's securities markets, an empirical study on the comovement between Shanghai and Shenzhen securities markets is carried out in this thesis. The emphasis of this thesis is the empirical study on the whole comovement and industry comovement between Shanghai and Shenzhen securities markets. On the basis of the investigation several suggestions on how to integrate these securities markets are brought forward.The empirical results indicate that there's no co-integration between Shanghai and Shenzhen securities markets. Meanwhile, the index in Shanghai securities markets mainly influenced by itself, and it has great influence on Shenzhen securities markets' index. The whole comovement between Shanghai and Shenzhen securities markets shows that Shanghai securities market is more effective than Shenzhen securities market. The empirical study on industry comovement shows that there are some sorts of different comovements between industry comovement and the whole market comovement, specifically, the finance industry indexes and pharmaceutical industry indexes have a significant comovement between the two securities markets, which does not exist in the IT industry.