The Detection Model Of The Co-movement Effects Between Asset Prices Of Shanghai And Hong Kong Stock Markets

As the increasing internationalization of Shanghai Stock Market and the increasing ’mainlandization’ of Hong Kong Stock Market, the relationship between the two markets has been strengthened significantly. Therefore, it is of significant value of guidance for international investors and regulators of stock markets to construct detection models of ’co-movement’ effects between asset prices of Shanghai and Hong Kong stock markets.Nowadays, models could be classified into two classifications according to whether a model considers jump or not. BEKK-GARCH model is the rather advanced one among the models with not considering jump. While BN-S model, which belongs to the other classification, is a detection model of jump of single asset price, while it couldn’t detect the co-jump effects between two asset prices. Therefore, this paper expands the BN-S model to construct detection models of co-jump effects between two different asset prices for detecting the co-jump effects between Shanghai and HK stock markets.This paper firstly constructs a detection model of co-movement effects between asset prices of Shanghai and Hong Kong stock markets based on BEKK-GARCH and empirically studies the co-movement effects with the sample data of daily frequency of Shanghai and Hong Kong stock index from2005to2012. The results show that there is bilateral co-movement effects between Shanghai and Hong Kong stock markets, while the effect from Shanghai to Hong Kong is greater than that of reverse direction. Secondly, this paper separately constructs detection models of single asset price of Shanghai and Hong Kong stock market based on BN-S and has empirically researches with the sample data of5minutes frequency of Shanghai and Hong Kong stock index from2009to2012. The results show that it is common to exist jump in the process of fluctuation of the both two Stocks. Finally, this paper constructs detection models of co-jump effects between asset prices of the two stock markets on the basis of detection model of single asset price which based on BN-S model. The results show that there are some co-jump effects between the two stock markets. What’s more, the results also show that there exists synchronous jumps between Shanghai and Hong Kong stock markets.