The Shanghai Composite Index And Other Financial Market Index Coherence Analysis

With the development of financial liberalization and innovation, the global finance tends integration, simultaneously, the relevance of the global finance market is enhancing. As early as the 1970s, scholars have already begun to study the phenomenon of linkage between financial market and have gone deep into the research of the linkage mechanism. But the research about China’s securities market is relatively small. In the early of China’ s stock market building, in order to ensure the safety of China’s capital market and resist international risk, Chinese government adopted a series of restrictions on foreign investors to invest in China’s stock market which led to the China’s markets was almost closed. But as entering the WTO, reform of non-tradable shares and reform of mechanism for setting the renminbi exchange rate, china’s stock market is increasingly influenced by others and the linkage and the mutual relationship between them is increasingly attracting people’s attention.In this paper, the sample data contains:the Shanghai Composite Index each month closed, international stock index each month closed, renminbi exchange rate(monthly average),WTI and London gold spot month closed price. Firstly, we adopt continuous wavelet analysis to get charts and continuous wavelet analysis power spectrum which used for understanding the characteristics of each time series’fluctuations;Secondly,we adopt cross-wavelet analysis to get coherence and phase angle diagram which used for analysis the volatility between the various time-series.Through this research, we believe that:with the reform and development of China’ s stock market, the openness of China’ s stock market is gradually improving and the linkage between international stock markets has greatly enhanced. In the long run, the stock markets of developed countries for the Shanghai index has a leading role, but since 2005, especially after the year 2007, due to the rapid development of China’ s economy, the stock market is already begun to, lead other securities markets in the short cycle. In addition to this, there is coherence with different character between exchange rate, WTI, the London gold price and the Shanghai Composite Index.