Market Integration Analysis Of AH Market Under The Background Of Shanghai-Hong Kong Stock Connect Program

Shanghai-Hong Kong Stock Connect program, as one of the important measures of domestic capital market reform, have been given a lot of mission. One of its core mission is to lay a solid base of the opening of capital, so that Chinese capital market can be better intergrated into the international stage and make a more resounding voice.In this paper, cross-listed stocks’ trading time differences under the background of the opening of Shanghai-Hong Kong Stock Connect program were studied. The main content is:the first is the study on the change of transaction mode since Shanghai-Hong Kong Stock Connect program started, and significant changes were founded. The second is the study of high frequency intraday trading interaction relationship and response time. According to the data’s characteristic, the VAR and VECM model was used, and the impulse response analysis and variance decomposition analysis was also used. The comprehensive comparison study found that the interactions on price volatility sequence of A/H share do exist, that A shares significantly influence H shares. A shares have more price discovery function. The change of before and after the opening of Shanghai-Hong Kong Stock Connect program is that:the influence between A/H shares grew longer and bigger, but the H-shares still contributed little to the price discovery and were not in the leading position. The third is about the intraday transaction influence taken by the H-shares since the H market has 1.5h more than the A market. The change of before and after the opening of Shanghai-Hong Kong Stock Connect program was also foused.12 representative stocks were choosen, and panel data model was used. More Hong Kong stocks influence Shanghai stocks significantly by the additional 1.5h transaction time, and the effects of short-term (half an hour) were positive. The trading day differences were also made and big price jump can only been observed when the price of A (H) shares rose or fell a lot.The empirical results show that, in the four months since the opening of Shanghai-Hong Kong Stock Connect program, the influences between A/H shares were strengthened, A shares had dominant position in price discovery. Hong Kong stocks intraday trading pattern were changed by Shanghai stocks. The fluctuation relationship of the two markets have increased, reflecting in the longer duration of interaction and A shares are also increasingly affected by the fluctuation of H shares, although not so many. Trading time differences between day and intraday cause little influence between A/H shares. But as time goes by Shanghai-Hong Kong Stock Connect program will make the influence growing bigger, which will lead to more price jump phenomenon.Overall, with the unique angle of view from the time difference between Shanghai and Hong Kong markets, a variety of analytical methods were used, found that the implement of Shanghai-Hong Kong Stock Connect program does promote the integration and make stronger correlation of A/H market. The program plays a very good role in promoting the healthy development of China’s capital market as well as internationalization of capital market.