Chinese Stock Market Volatility And The Linkage Between Empirical Analysis

In recent years, there has been great development in china's domestic stock market. The basic completion of Share-split Reform repaired the defects of stock market's system, the scale of stock market has expanded rapidly, the structure of listed company tended to be more reasonable, institutional investors strengthened themselves constantly, with the appearance of Security Financing and Stock Index Futures, the China's domestic stock market is moving towards maturity gradually. But the trait of large volatility in China A Shares will bring great risks to the investors, although volatility is one of the most important feature of capital market, and plays fundamental role in realizing economic function as well as guaranteeing the macroeconomic stability. Meanwhile, with the more close economic relationship and the more frequent financial transaction between mainland of China and Hong Kong, more large inland enterprises begin to enter Hong Kong market; as a consequence, the proportion of domestic enterprises in Hong Kong's stock market grows greater and greater. Their market capitalization has even exceeded the local enterprises'in Hong Kong. So it is very necessary to study the volatility of stock market and the co-movement between two stock markets.First, the thesis puts the Shanghai and Shenzhen 300 Index between 2005.4.8 to 2009.12.31 to statistical test, and establishes the model of volatility of China's stock market on the basis of the GARCH model using Ewiews software. The research shows that volatility in China's stock market has strong continuity. When the stock returns begin to fluctuate unusually after being stricken, it can not be eliminated in a short time. What's more, there exists a "leverage phenomenon", that is to say the "bad news" can create larger volatility than equivalent "good news" does. Next the thesis separates the data from 2005.4.8 to 2009.12.31 into two parts, and analyzes Shanghai and Shenzhen 300 Index,Hang Seng Index and China Enterprises Index by using co-integration, model of error correction, function of impulse response and Variance decomposition based on the model of VAR. The result shows that co-movement between domestic stock market and Hong Kong stock market is becoming stronger constantly, and there is no clear co-movement between two stock markets in the first part, but we can see it in the second part in some degree. At last, the thesis gives some policy recommendations on present situation of China stock market.