Study Of Domestic And Foreigner Stock Market Co-movement In The Context Of The Financial Crisis

On February13,2007, U.S. mortgage risks began to emerge in America. HSBC Holdings announced its performance which brought about the stock market crash. The sub-prime mortgage crisis kicked off around the world. In the November2009, the financial crisis of the European debt out-broke at the global. Chinese stock market was strongly impacted by the global financial crisis. The stock was shocked drastically and continued downward. With the continuous development of Chinese economy which is impacted by the developed countries such as the U.S., the U.S. stock market volatility quickly passed to Chinese stock market. It’s very important to study the co-movement effect between Chinese and U.S. stock markets.This article is based on the sub-prime crisis and the European debt crisis, which combines the theories and the empirical results to discuss the co-movement effect between the two countries’stock markets. Firstly this article expounded the theoretical mechanism from the economic fundamentals, international capitals, market expectations and market transmissions. Then, this article uses the empirical research methods to study returns and volatility co-movement and tail dependence. The data sample is divided into three sub-samples:before the financial crisis, the sub-prime period, European debt crisis period. At the research about the return rates and volatility co-movement, we divide the mainland, Hong Kong, the United States stock market into domestic stock market and foreign stock market for comparative study. On tail dependence research, the main research is about the mainland and United States stock markets tail dependence. This paper uses a VAR model, the Granger causality test, impulse response function, serial correlation, EGARCH model, time-varying copula function.This article obtained after the subprime mortgage crisis, the theoretical analysis and empirical conclusion means that two stock markets have a significant. Significant changes appeared in return rate and volatility co-movement before and after the crisis occurred, and there is an increasing trend during the European debt crisis.A significant positive impacts the domestic stock market, and a significant negative impacts the foreigner stock market. From the tail dependence studies we think that after the financial crisis, Chinese and the United States stock market have tail asymmetry which means lower tail greater than upper tail.