| Shanghai-Hong Kong Stock Connect Program, which means Shanghai and Hongkong stock market trading connectivity mechanism. It is said that investors entrust the Shanghai stock exchange members or Hong kong stock exchange participants, through securities trading service companies that the Shanghai stock exchange or Hong Kong stock exchange established at the location of the other, buying and selling the other exchange listed shares within the scope specified. Shanghai-Hong Kong Stock Connect program is one of the important measures for deepening the reform of capital market in our country, and is a landmark event of China’s capital market, especially the stock market in the development process. The study of the influnce of Shanghai-Hong Kong Stock Connect Program to volatility of Shanghai stock market has important theoretical significance and practical significance about cognitiving the change of risk during global economic integration, promoting the long-term healthy development of stock market, and speeding up the pace of opening financial market in China.This article selects data samples about related index of Shanghai and Hongkong stock market and the use of fund quota and the others from November 17, 2012 to April 10, 2015. The article mainly adopts descriptive statistics analysis, regression analysis, VAR model and GARCH and other methods to describe and compare volatility characteristics before and after the launch of Shanghai-Hong Kong Stock Connect Program. The empirical results show Shanghai-Hong Kong Stock Connect Program make volatility of the Shanghai stock market taking place structural changes, increaseing volatility in the Shanghai stock market.On this basis, this paper respectively, from the perspective of Shanghai and Hong Kong markets linkage and from the perspective of internal conduction mechanism in Shanghai stock market, studies the ways how Shanghai-Hong Kong Stock Connect Program changes volatility of Shanghai stock market. The empirical results show Shanghai-Hong Kong Stock Connect Program has not enhanced the mean spillover effect between the two markets, and after the launch of Shanghai-Hong Kong Stock Connect Program, Shanghai stock market has not enhanced the learning effects to the pricing of Hong Kong market in order to reduce the volatility. Investors buy or sell stock in the other market pricing in different currency through Shanghai-Hong Kong Stock Connect Program can bring more exchange rate risk into Shanghai stock market. And connectivity mechanism also enhance the volatility spillover between the two markets. That fund flows into Shanghai stock market though Shanghai-Hong Kong Stock Connect Program can reduce the volatility of Shanghai stock market. While money that flows out of Shanghai stock market though Shanghai-Hong Kong Stock Connect Program increases the volatility of Shanghai stock market. In the further study, we can find that Shanghai-Hong Kong Stock Connect Program helps to raise transaction scale, which helps to reduce the volatility. Shanghai-Hong Kong Stock Connect Program cannot contribute to improve the quality of investors, and it will increase the volatility to some extent. Shanghai-Hong Kong Stock Connect Program makes the arbitrag across the Shanghai and Hongkong market convenient and fast, but the investors who pursue arbitrags are not rational enough to tame the volatility. Shanghai-Hong Kong Stock Connect Program also enlarges the Hongkong market influence factors impacting on Shanghai market increasing the Shanghai stock market volatility. Investors of connectivity Shanghai stock love to chase the risk, and Shanghai-Hong Kong Stock Connect Program expands transaction scope of connectivity Shanghai stock increasing the mean spillover from connectivity Shanghai stock to non-connectivity Shanghai stock. In this case, there is greater volatility flowing into non-connectivity Shanghai stock.Based on the above empirical results, in order to promote long-term healthy development of Chinese stock market and restrain the excessive volatility in the Shanghai market, we should take the following measures: Firstly, suspend increasing the number of the underlying stocks, taking measures such as improving the legal system construction of Shanghai stock market and enhancing investor education to strengthen the effectiveness of the Shanghai stock market itself and reduce volatility in the Shanghai market. Then, before the securities exchange mechanism in Shenzhen stock market runs well, we should delay Shenzhen-Hong Kong Stock Connect Program.Lastly, when we make sure that Shanghai stock market is effective and smooth, we can extend the number of the underlying stocks of Shanghai-Hong Kong Stock Connect Program, so as to strengthen the Shanghai stock market’s connection with the international financial market, and increase the mean spillover between Shanghai market and others in order to enhance the learning effect about Shanghai market to other better markets, further easing the stock market volatility and strengthening Shanghai’s pricing ability. |
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