Analysis Of Co-movement Between China's Mainland Stock Market And Hong Kong Stock Market Upon Shanghai-Hong Kong Stock Connect Program

The implementation of the Shanghai-Hong Kong Stock Connect program access policy is one of the recent capital market event, and Shanghai-Hong Kong Stock Connect program on the Shanghai stock market is trading mechanism of connectivity. Shanghai launch time has been implied about a year, but the current domestic literature about the research is relatively scarce. The completion of this paper is helpful to enrich the domestic research on Shanghai-Hong Kong Stock Connect program, the implementation of the general policy for Shanghai and Hong Kong, and has certain reference significance for the implementation of the subsequent Shenzhen-Hong Kong Stock Connect program.Firstly,this paper retrospected the study on the theoretical research and empirical research of correlation between securities market, and research the mainland stock market of Shanghai stock index and the hang seng index in Hong Kong's stock market on the basis of these theories. In the empirical part, this article selects some events as cut-off stages, and then test the Shanghai composite index and hang seng index correlation on every stage. The method is by using cointegration to test if there is a long-term equilibrium relationship between them, and then using constructing econometric model after they are tested by granger causality test, impulse response function analysis and variance decomposition to test their correlation effect, and then analysis the co-movement between the two cases. In the end of this paper, we analyzed the causes of their correlation, and use the co-movement of the theory and the normative analysis to explain them.In this paper, through empirical analysis the conclusion is that the Shanghai composite index and hang seng index correlation is different in different stages. In terms of relevance, it is growing on each stage.especially when the Shanghai-Hong Kong Stock Connect program is implied, the relevance of the stock market is increased. Besides,the stock market crash may also lead to the relationship between the Shanghai composite index and hang seng index further improved. The Shanghai composite index and hang seng index in the first stage and the third stage has the long-term equilibrium relationship, but the second stage doesn't have long-term equilibrium relationship,because affected by the impact of Shanghai-Hong Kong Stock Connect program implementation, which makes both long-term equilibrium relationship between stock market temporarily disappearing. Through the granger causality test, the author found that the relationship between the two in the second stage has a granger causality reversal, and reversed again in the third stage. On the whole, the Shanghai composite index for the hang seng index influence is bigger, and the influence of the hang seng index on Shanghai stock index is not significant.The author found that in the process of empirical research on Shanghai-Hong Kong Stock Connect program's implementation makes the second phase of the Shanghai composite index and hang seng index inversion of granger causality.The reason may be that the Shanghai-Hong Kong Stock Connect program changed the granger causality relationship between the Shanghai composite index and hang seng index. This paper tries to explain this situation from fundamentals. And the third stage regression which went to the first stage of the granger causality condition, may be due to the port of Shanghai general policy impact being diluted by time, and the mainland market crash increased the impact on the rest of the securities market, which leads to the Shanghai composite index once again having granger impact on the hang seng index.After the empirical part of the analysis, the author respectively to participate in the mainland or Hong Kong market related Suggestions for regulators and investors. The author suggested regulators to put forward to promote the development of the real economy, adjust the economic structure, strengthen the management of the capital inflows, accelerate the construction of the financial system and financial market reform, etc. For investors, the author suggest that when asset allocation, we must give full consideration to both the influence of the spillover effects of the securities market, the rational use of scattered across the market portfolio to market risk, etc.