The Empirical Analysis On The Influence Of Short-term International Capital Flows On The Stock Market In China

Short-term international capital that gets in and out of a country will have muchimpact on a country’s economy and trigger the currency crisis and the financial crisis,especially in highly integrated world.Now the flow channel of international short-termcapital is more secretive, and the scale of international short-term capital islarger,which causes stronger damage. Short-term international capital flows hasbecome the focus of the topic in the world.Because of mobility and pursuit for short-term high profits, short-terminternational capital often leads to severe fluctuation of the stock market, evenfinancial crisis. Although China is the world’s largest emerging market, however,whose financial system is not perfect, thus faced with economic fluctuation triggeredby short-term international capital.There was a one-way Granger causality between short-term international capitaland the Chinese stock market volatility. The results of Granger causality test onshort-term international capital flows and the U.S. stock market volatility showed thatshort-term international capital in China and the U.S. stock market volatility hadtwo-way Granger causality.It can be inferred that stock market fluctuations ofdeveloped economies including America may affect China’s by cross-border ofshort-term international capital.By performing threshold for self-autoregressive conditional heteroskedasticity,the paper constructed four indicators. The study found that the U.S. stock affectedChina’s stock market via short-term international capital, leading to the multipliedimpact.And the difference of the country’s stock market returns between China andthe United States played an important role.