| The stock market in mainland of China has experienced plenty of changes and developed a lot, since it was established 20 years ago. And in the process of global financial integration, it had completed the equity division reform and improved the delisting system. At the same time, it took practice in a series of reform and opening-up policies, such as opening stock B market, carrying out QFII/QDII and so on. However, with the development of the capital market in mainland of China, It’s obvious that the links between mainland stock market and overseas one become more and more closely, especially with the Hong Kong stock market. Hong Kong is not only the international financial center, but also a window of inland economy and trade development. And with the trade cooperation between mainland of China and Hong Kong of China becoming more and more, Hong Kong plays an important role in guiding the capital market of China opening to international market and developing itself as well.On November 17, 2014, Shanghai-Hong Kong Stock Connect program was put into effect, which connected the Shanghai and Hong Kong stock market. In a sense, Shanghai-Hong Kong Stock Connect program becomes a significant measurement for cross-border securities investment project after QFII/QDII and the cross-border RMB trade settlement of inter-bank bond market in our country. Under the circumstance of comprehensive reform and opening up deeply, it becomes a great innovation to promote the opening of the capital account and the internationalization of the RMB. Furthermore, it will become an important force to promote China’s financial reform, and accelerate the internationalization of China’s capital markets. Meanwhile, accompanied by the deep integration with the international market, it will enhance the stage and level of opening up.Under such a new historical background, this paper is written to study the co-movement relationship between Shanghai and Hong Kong’s stock market based on the Shanghai-Hong Kong Stock Connect program. Firstly, according to domestic and foreign research literature, the paper is written to summarize the theoretical basis, analyzing the connotation and the reasons of stock market co-movement, putting forward relative theory for the stock market co-movement. Secondly, the difference and linkage factors between the two markets are deeply studied. And hypothesis of the co-movement relationship between Shanghai and Hong Kong’s stock market is put forward based on the relative theory and further system research of Shanghai-Hong Kong Stock Connect program. Thirdly, empirical analysis of earlier period、preparatory period and later period for co-movement relationship between the two stock markets is carried out by VAR model、 Granger method and impulse response function and variance decomposition method. Finally, specific suggestions are proposed.The research conclusion indicates that the two stock markets don’t have a long-term co-integration relationship, while getting to have one after the program being enforced, and Hong Kong stock market plays a leading role in the relationship. What’s more, Shanghai stock market has a little influence on Hong Kong stock market, and from the prospect of volatility, the influence from Hong Kong stock market gets weaker in the later period compared to the preparatory period. According to the empirical research results, the suggestions are put forward respectively for different groups. For the government financial supervisors, they should pay much attention to the financial reform innovation as well as avoiding financial risks, promoting capital market in mainland of China to develop well and open up steadily, and accelerating the pace of internationalization of China’s capital market. For investors, they should have a profound understanding of the investment opportunities of Shanghai-Hong Kong stock connect program, and benefit from the co-movement of the two stock markets under the condition of avoiding ricks appropriately. |
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