Does "Shanghai-Hong Kong Stock Connect" Have An Significant Impact On The A-share Market?

After nearly three decades of rapid development,China’s capital market plays an increasingly important role in China’s economic development,and in the future it will certainly occupy the global capital market in an increasingly important position.In the context of the rapid development of the domestic capital market,the state has promulgated new laws and regulations or the implementation of relevant policies to standardize and guide the healthy development of the capital market.As an important platform for domestic enterprises’ financing and investors’ investment,the stock market is closely related to the development of China’s economy and is highly valued by the management.With the gradual opening up of China to the outside world,the capital market has also accelerated the pace of opening to the outside world.In particular,the recent accession of the RMB to the SDR has promoted the process of internationalization of the RMB,and further promoted exchanges and cooperation between the domestic capital market and the outside world and enhanced the link between the domestic capital market and foreign countries.The huge potential of domestic capital market is bound to bring the relevant departments attach great importance to,support norms and other related programs will continue to put on the agenda.On the one hand,a series of opening-up policy presented the good policy expectations to the market,on the other hand it also caused market participants’ question to the effectiveness of the policy.Therefore,effective evaluation of the policy effect allows the relevant departments to more intuitively discover the inadequacies and merits of the system itself,but also allow market participants to have a more rational and intuitive understanding of the policy,which are essential not only to the current policy of the Feasibility analysis but also to the future work related to the development.However,there are relatively few studies on the policy effect of capital market in China,and there is no systematic and effective method to study such problems.November 17,2014," Shanghai-Hong Kong Stock Connect" formally implemented,which is another important capital market policy of opening to the outside world the Chinese capital market following the 2002 QFII system,2011 RQFII system,so the system policy Effect research is particularly important.Based on the above background,this paper take a total of 816 stocks which was listed on the Shanghai Stock Exchange or the Shenzhen Stock Exchange before August 23,2013 as a sample,and in the counterfactual theoretical framework,using empirical research methods,this paper studies the policy effects of" Shanghai-Hong Kong Stock Connect" system from the perspective of volatility,profitability and valuation from the two time dimensions of" Shanghai-Hong Kong Stock Connect"system which include preparation period and implementation period.At the same time,this paper also studied the net difference of the impact of different scales..First,this paper studies the net effect of the policy on volatility,profitability and valuation in the period of preparation of the "Shanghai-Hong Kong Stock Connect " system(150 days after 2014.4.10)by combining Propensity Score matching and Difference-in-Difference method.It is found that the change of investor sentiment during the preparation period of the system will have a significant positive impact on the yield of the underlying stock but does not significantly affect the volatility and valuation level of the underlying stock.Secondly,this paper studies the net effect of the policy on volatility,profitability and valuation in the implementation period of the "Shanghai-Hong Kong Stock Connect" system(150 days after 2014.11.17).The results show that the net difference between profitability and volatility in the intertemporal study can be significantly different in the vast majority of regions,but does not significantly affect the stock valuation level.Finally,this paper divides the sample of the intervention group into big-cap stocks and small-cap stocks according to the size of the capital stock,and studies the net effect of the policy on volatility and profitability in the implementation period.It is found that the impact of the system on the large-cap stocks is mainly concentrated in the early stage of the policy implementation,while the impact on the small-cap stocks is concentrated in the middle and later stages and is a continuous state.The main contribution of this paper is to study counterfactual problems in the capital market by using PSM + DID method,and to analyze the net effect of"Shanghai-Hong Kong Stock Connect" system on A-share market volatility,profitability and valuation from a global perspective;In addition,the sample size of the intervention group is divided into large and small stocks according to the size of the capital stock,and the difference of the policy effect between the large and small stocks is analyzed.The author hopes that the conclusions of this paper can make the market participants have a more intuitive and rational understanding of the policy,while the relevant departments have some reference value.