Research On The Spillover Effects Between Mainland Stock Market And Hong Kong Stock Market Under The Background Of Shanghai-Hong Kong Stock Connect Program

The spillover effect refers to the change of asset returns and volatility in financial markets not only affected by their early gains, may also be affected by the earnings changes and fluctuations in other financial markets; Which include the mean spillover and volatility spillover, reflect the information transmission mechanism between market returns and risk. With the constant deepening of financial reform in our country, the mainland and Hong Kong in economy, trade, financial investment and policy aspects of cooperation, the connection between them is more and more close, making the transfer of capital information more convenient. On November 17, 2014, Shanghai-Hong Kong Stock Connect Program come into effect, the major policy event is bound to impact on the spillover effects of the two markets.This article combines normative analysis and empirical analysis method to study. Firstly,by combing the domestic and foreign literature found that the lack of the research status, then take advantage of previous scholars’ mature empirical methods, select the Shanghai composite index and the Hang Seng index as samples, to study the Spillover Effects between Mainland stock market and Hong Kong stock market under the background of Shanghai-Hong Kong Stock Connect Program. In the standard analysis stage, describes the spillover effect between financial markets on the basis of the theory, the program and the related factors between the mainland and the Hong Kong stock market; in the empirical analysis stage, respectively, the establishment of the VAR model and the BEKK-GARCH(1, 1) model to investigate the mean and volatility spillover effect of the program before and after, and analyzes the empirical results. Finally, the relevant recommendations are given for investors, regulators and policy makers according to the conclusion. The conclusion of the study is:(1) The correlation between the mainland and Hong Kong stock market has been improved after the start of the program.(2) This program in the impact of the mainland stock market than the impact of the Hong Kong stock market.(3) In terms of spillover benefits, the stage before the start of the program, between the two markets does not exist significant revenue spillover effect, the stage after the start, there exist from the Hong Kong stock market to the mainland stock market is significant positive one-way spillover benefits and there is a lag effect. The Hong Kong stock market returns have a leading role in the mainland stock market returns.(4) In terms of volatility spillover, the stage before the start of the program, there are smaller volatility spillover from the Hong Kong stock market to the mainland market, the stage after the start, between the mainland stock market and Hong Kong stock market exists bidirectional volatility spillover and volatility spillover strength. This mean that after the start of the program the risk information is two-way delivery between two markets and the transfer capability to further enhance.(5) After this program started, the mainland stock market and Hong Kong stock market to further improve the degree of association, and has the dominant position of the information advantage of the Hong Kong market.