The Co-movement Research Between Chinese Stock Market And Worldwide Stock Markets

As the most important part of the world capital markets, stock market has always been the focus of academic research. In the context of globalization and financial integration, the phenomenon of economic identity gradually emerged in the stock market. The relativity between a certain market and the main stock markets is a sign of the economic maturity. Since the 1980s, great stride had been made in Chinese securities market, as well as the same trend of integration and the partition towards the world market. Also, some important financial issues tend to strengthen this trend and make a greater openness of the Chinese stock market. This trend, however, posed a bigger risk to investors. Therefore, it has theoretical and practical significance to study the relationship between Chinese market and the world market in the post-crisis era. For the theoretical aspect, firstly, there were no systematic researches previously, so this study will give a reasonable basement of this co-movement phenomenon. Secondly, as the present researches mainly treated the co-movement of Chinese market and the world market isolatedly, it is hard to recognize the degree comparing with other economics. By introducing the data of the other economics of BRIC as reference, this study on the co-movement might be able to solve this problem. Actually, study on the linkage between stock market could help investors judge the trends of general stock markets, forecast prices, thus make investment and portfolio analysis more rational. At the same time, from a macro perspective, it also has a relative value to the market supervision and risk avoidance.By means of Quantitative Finance analysis method, this paper examines the alteration of the co-movement between Chinese market and the world market in the period of the June 2006 to the end of 2010. And comparing with Indian, Brazil and Russia, which are pretty similar to china, this paper arrives at a more objective and comparable conclusion. The empirical results show: Firstly, China and the major stock indexes have a positive strong correlation, and financial crises make this short-term correlation more significant. As the financial crisis calmed down, such short-term positive correlation had also been weakened. Secondly, the long-run equilibrium relationship between China and the major indices was relatively weak before the crisis, and it was further weakening while the financial crisis occurred. But it had made a remarkable growth in the post-crisis period. Compared with India, Brazil and Russia, the influence of financial crisis on the linkage between Chinese stock market and world market is relatively small. Thirdly, the financial crisis changes the Granger causal relationship between BRIC markets and the world markets. Fourthly, the positive shocks have been formed basically between China and six stock indices and it was strengthened after the crisis. It demonstrated that the global financial crisis enhanced the co-movement between Chinese stock market and the world market. The result shows that the financial crisis has largely changed the co-movement between Chinese stock market and the world market. Espacilally the short-term co-movment had been enhanced significantly by the end of the crisis. In the long run, the long-standing co-movment was increasingly stable and clear, and then shows that China's stock market due to the occurrence of the financial crisis become more international.