Research On The Market Linkage Of A+H Share In The Shanghai-hongkong Stock Connect Program

A+H share is defined as a class of special shares which are traded on stock market in both Mainland and Hongkong SAR. In the recent several years, our government has been making constant innovation policies to develop the financial market.As a result, the linkage between the Mainland and Hongkong SAR market is strengthened.Meanwhile, theoretical analysis and empirical study on the linkage between the two markets have been written by many domestic and foreign scholars.As a special class of shares, A+H shares play a very important role in analyzing the linkage between two markets. With the Shanghai-Hongkong Stock Connect program officially opened on November 17 th 2014, this paper will further discover the linkage between two markets, making supplement to the original research results,.First of all, we analyze the cause of the formation of the linkage in the market.There are three angles for us to start our research, namely, effective market theory、behavioral finance theory and economic integration theory. Then,the article introduces the new regulations and laws our government made in recent years, describing its development status in detail. Also,the paper further divides the development of A+H shares’ linkage into three stages to make a statement. Through combing the development of the new system, in this section, we can get a conclusion that the intensity of linkage effects between the two markets is related to the market innovation and openness.Secondly, this paper introduces the theory of stock price index and empirical model involved in empirical study. In the part of index compilation, to get a more representative conclusion, this paper choose the amount of listed shares as the weight,compiling the specific index of a number of 82 A+H stocks. In the part of empirical model, this paper introduces a series of empirical models and the purpose of those models, establishing a theoretical basis for the following empirical analysis.Thirdly, on the basis of theoretical foundation, the paper selects 82 A+H stocks to makes further empirical analysis. The period of study starts from October 15th2013 to December 17 th 2015. Three conclusions can be made finally:(1) During the26 months from October 15 th 2013 to December 17 th 2015, there is a linkage for A+H shares between two markets.(2) The linkage between the Mainland and Hongkong SAR market is strengthened due to the Shanghai-Hongkong Stock Connect program.(3)The rise of this linkage mainly comes from the A stock market, and the information can be transmitted in a two-way flow instead of the former one-way flow.Finally, according to the empirical results, combined with the development of the mainland and Hongkong SAR stock market, some policy recommendations are put forward in the paper. For investors, we suggest that they should emphasize on the linkage effect between two markets、exchange rate, etc. And we also encourage them to pay attention to the value of investment; For supervision department, we propose that they should further improve the Trading Mechanism、promote the regulatory cooperation between the institutions in two markets, and then launch Shenzhen-Hongkong Stock Connect program at a higher level.