Research On The Co-movement Of The Stock Markets Between China And America

With the speeding up of world economic integration and the continuous improvement of global capital flows, the relationship among stock markets all over the world becomes more and more closely. Because of the rapid development of emerging market economies, more and more experts study on the stock market in order to explore the co-movement between different countries. Among them, as the world’s second largest economy and continuous improvement openness to the stock market, China is to become an ideal object to study the co-movement of the stock market.The paper represents stock market in the United States as the international market and it studies the co-movement between China and the United States stock market mainly from the rate of the yield. The Shanghai Composite Index and the Dow Jones industrial average index are selected as the representatives of China and America stock markets. In order to study the co-movement between two markets, we select two market indexes of the opening price and closing price as the object of study. And we divide study period into different time periods according to major events occurred in the stock market and then compare the changes before and after the events.Such as from the accession to the world trade organization, China’s stock market gradually introduced QFⅡ、QDⅡ systems and Shanghai-Hong Kong Stock Connect program. We regard these changes as symbols to compare difference of theco-movement in different period. This paper combed the relevant literature about stock markets co-movement, and then introduces the theoretical mechanism of the co-movement between the stock markets in different countries. Finally we do some empirical analysis through the modern econometrics method on the co-movementbetween China and the United States’stock market.In the part of empirical analysis, the paper divides study period into five stages. It analyses the co-movement between China and America’s stock market through many kinds of empirical analysis methods, including correlation, coefficient analysis, co-integration analysis test and Granger causality test. Economy of China is growing rapidly during last thirty years and the openness of stock market is also constantly improving. Because of this, the empirical study results show that the co-movement between China and the United States gradually increased, and there is a spillover effect of stock market in the United States to the China’s market. After the introduction of the Shanghai-Hong Kong Stock Connect program, China’s stock market also has the weak influence on the United States’market. During the financial crisis period in such extreme situations, the co-movement between the two stock markets will be enhanced. American stock market will put a great influence onChina’s stock market.The paper puts forward some proposals to relevant person based on previous research results. We hope that China’s stock market can be effectively in line with international stock markets in the process of deepening reform.