Research On The Comovement Between China And US Markets After Subprime Mortgage Crisis

As correlation o f internationa l finance has been increasing, the ma inly stockmarkets over the world has been seemingly bind ing together to go up and down.Especia lly after the US subprime mortgage cris is, the acumen Americna fina ncerstransferred the risks of the mortgage market to ma ny other nations, resulting a moreapparent econo mical comove nment. The como ve ments between stock markets havenot only found in US, Japan, UK, Germa ny, whic h are the ma iny devoleped countries,but also appeared in China, Singapore, Mexico etc. Centered on the period after thesubprime mortga ge cris is, this paper will study the more detailed como veme ntphenomenon between China and US through our systematic methodology.This paper will focus on emp irica l study. Through a series of economica l modeland stastistic analys is, we have unrave led the mystery of the comove ment betweenChina and US, and obtain the following conclusions:First, there are two exp lainations of the causes of the co move ment between thesetwo countries. One is dissemination, also named Spillover Effect; the other isContagion Effect. The cause of the como veme nt between Chinese B stock market andUS S&P is the second one. This happens because of the degree of Chineseinternationa lization, the scale of the stock markets etc. The divis ion of Chinese stockmarket into A a nd B, may e xpla in why the impact of US stock market can has e ffectson Chinese B stock market while has negligible effects on A stock market.Second, we first test the typ ica l como veme nt o f investment pro fit ratebetween the stock markets of China and US, us ing Granger causality test, GARCHModel, ARCH Model, and discovered that there exists a co movent fro m US market toChinese B market, which mea ns the variations o f US stock market will have an effecton Chinese stock market, but the reverse como veme nt doesn’t exist. Plus, there is n’t aGranger Causality between Chinese stock market and US stock markets. Theseconc lus io ns may provide some suggestions about the internatio nal investme ntdecisions and execution of some economical policies.