Based On The Copula Theory Of The Shanghai Index And Real Estate Index Relationship

With the development of global economic integration, the linkage between international stock markets also showed a warming trend after the financial crisis in the United States and the European debt crisis. The view has been recognized. On February27,2007, global stock markets presented a domino effect that stock markets fell one after another from Europe to the U.S. The New York stock market emerged the biggest single-day drop since the "911event ". On this day, Chinese stock market slumped which is the highest single-day decline in10years.Stock market is a barometer of the economy, and it occupies an important position in the development of Chinese economy. With the accelerated pace the process of integration of Chinese reform and opening up, especially in the real estate market, has become one of the most important factors of economic development. The U.S. subprime mortgage crisis is due to the bursting of the real estate market bubble, so this should cause our special attention. Because now the Chinese real estate market bubble is in the critical period of near breaking down, if not treated properly, it is likely to become the target of foreign financial institutions attacks and finally this will result in tragic situation. For example, in1997, Soros sniped HK dollars that causes the Hong Kong stock market crash on October23,1997, so＄40billion stock market capitalization vanished. Soros sniper has made the Hang Seng Index fell from the peak of16673points into6660points, which has fallen by60%.This paper studies the correlation between the Shanghai Real Estate Index and the Shanghai Composite Index. The previous research is mostly based on the linear correlation analysis method, but now we introduce the copula theory that is a kind of statistical theory to study nonlinear, non-symmetry-related.This paper mainly applies Copula theory to empirical analysis. The statistics and parameter estimates in the model reflect the linkage between the markets. This article select the Shanghai composite Index (code "000001") and the Shanghai Real Estate Index (code "000006") as the research objects. Consider to financial crisis, I selected daily closing data from2004January4to2012December31.I use maximum likelihood estimation to get the parameter estimates of binary normal copula function and binary t-copula function model. By analyzing the parameter estimates, I found strong linkage between the Shanghai Real Estate Index and the Shanghai Composite Index. If the Shanghai Real Estate Index rose sharply or down, the Shanghai Composite Index also will be higher or lower probability as high as49.08%.