China And The Major International Stock Market Linkage Analysis

In recent years, China and the international capital markets exchange much more than before, particularly in the stock markets, after major international stock markets rising and felling, China's stock market would show the similar situation correspondingly, Meanwhile, when China's stock market changes, the major international's will response, too. Does this mean that there is some co-movement between China's stock market and major international counteries'? If this co-movement is real, we can do some research and get the conclusion, which is good for investors to make up investment strategies, and for regulators to develop regulatory policies, which is even benefit to draft the national macro-economic control policies. Therefore, the thesis has important practical significance.Based on the daily data from 1/4/2000 to 3/10/2010, this paper chose return rate of Shanghai's Stock Composite Index, U.S.'s Dow Jones Index, Japan's Nikkei 225 Index, U.K.'s Financial Times Index, Germany's Frankfurt Index, Singapore's Straits Times Index and Hong Kong's Hang Seng Index, and divided the time into 4 ranges by considering that the first QFII went into China, tradable share reform and USA sub-prime crisis, then did some empirical research about co-movement of Stock markets of China and major international countries. The results show that:(1) From the end of Asian economic crisis to the first QFII came into stock market of China, the daily return rate of Shanghai's index was only affected by Financial Times index, which indicated there was strong co-movement in stock markets between China and U.K., the stock market of China was mainly affected by the U.K.'s. On the contrary, China's stock market didn't affect other international markets significantly.(2) From the first QFII coming into stock market of China to tradable share reforming, the daily return rate of Shanghai's index was only affected by Dow Jones index, which indicated there was strong co-movement in stock markets between China and U.S., the stock market of China was mainly affected by the U.S.'s. On the contrary, China's stock market didn't affect other international markets significantly.(3) From tradable share reforming to U.S. financial crisis full-broking out, the daily return rate of Shanghai's index was only affected by Financial Times index, which indicated there was strong co-movement in stock markets between China and U.K., the stock market of China was mainly affected by the U.K.'s. On the contrary, China's stock market didn't affect other international markets significantly. (4) From U.S. financial crisis full-broking out to now, the daily return rate of Shanghai's index was only affected by Dow Jones index, which indicated there was strong co-movement in stock markets between China and U.S., the stock market of China was mainly affected by the U.S.'s. On the contrary, China's stock market didn't affect other international markets significantly.The results indicate that, for one thing, in different periods, due to different internal and external economic background, the Chinese stock market is not affected consistently by major international stock markets; For another, taking into account the characteristics of Chinese stock market's own development, because of its immaturity system, being emerging and economic transformation and so on, China's stock market almost does not affect the major international markets.