Analysis Of Comovement Between Domestic And Foreign Stock Markets

This paper selects the CSI300index、the UK’s FT100index、Germany dax index、Standard-Poor’s500index and the Nikkei225index to study stock market comovement between china and the remaining four countries’stock markets and their return spillover effect from April8,2005to January10,2012.First of all, we give a comprehensive description to previous research related to this issue home and abroad, then there is a command on the description, followed by some related theories including the mechanism of comovement from aspects of the economic base theory and market contagion theory、portfolio theory etc.. Secondly the paper reviews the foreign trade、direct investment international investor and the improvement of Chinese stock market to inspect the comovement between china and the remaining four countries. Since this article use a variety of research methods, there is a simple description of methods applied in the empirical process to make it easier to understand, including the correlation coefficient, the co-integration test, error correction model and granger causality relationship testing, impulse response function and variance decomposition. Next the article analyzes the five countries’index and return according to the methods introduced former, including the long-run equilibrium relationship and dynamic effects, stock markets’return spillover effect. Lastly, the paper gives the empirical results, and suggestion to relevant parties according the reason analysis and empirical analysis, including the investor, the relevant government departments and securities regulatory authorities.Through empirical research,the article finds:the comovement effect between china and remaining four countries is the most strong during crisis stage, so the market contagion effect exists; the economic connection between countries gets strengthened and the comovement gets intensified; the return spillover effect from European countries to china exists, Chinese market has a strong influence to Japanese stock market, while independent with the U.S. market; the market efficiency has enhanced after the crisis,for the response time to foreign market impulse has shortened,however is lower compared to other stock markets.Using a variety of research methods, this article studies the comovement of stock markets between Chinese and other four countries and their spillover effect, compared to previous studies,the paper has the following innovations:This paper chooses stock markets of four developed countries as comparison sample to study comovement and spillover effect with china’s stock market, no longer sticking to only between china and the U.S. stock market or between china and the hongkong or among developed countries; and the four countries lie on different continent, so that we can discover Chinese international influences to different continent; the paper selects CSI300index on behalf of Chinese stock market, and uses the most recent data; the research divides the study period into three stages to find out the change of comovement and spillover effect through vertical comparison.