The Empirical Research Of The Impact Of The Flow Of International Hot Money On China's Stock Market

International hot money plays an important role in the global financial market in the background of economic globalization of the 21 st century. From the 1997 Asian financial crisis to the 2007 US subprime crisis, international hot money problem has gradually become a hot topic to be researched. Due to the rapid development of China's economy, the reasons, such as the appreciation of the RMB expected, has attracted a large number of international hot money into China. This hot money spreads through China's financial market in a variety of ways, and the stock market has become one of the ideal to gathering places of the international hot money, which exacerbates the price fluctuation in the stock market and disrupts the order of the stock market in China. In the long run, with China's capital market gradually opens,once large sum of international hot money escapes from China, there will be a serious negative effect on our country's economy, and might even trigger a financial crisis. In view of above, this topic is worth being further researched and explored.In this paper, influences of the flow of international hot money on Chinese stock market are analyzed in the theoretical and empirical way. We first introduce the basic theory, definition, characteristics, source, and the calculation methods of international hot money, then we describe the present status of the flow and the channel of the international hot money. In addition to this, the positive and negative influences on China's stock market are studied. The VAR model is mainly applied to the empirical analysis of the relationship of the international hot money scale and the stock market price fluctuations. The results led us to the conclusion that the international hot money flow is the Granger cause of stock market volatility, while the volatility of the stock market's influence on the flow of hot money is not significant. Finally, this paper puts forward relevant policy suggestions in order to prevent the negative effects on China's stock market caused by the rapid flow of international hot money.