Research On The Co-movement Between Shanghai And Hong Kong Stock Market Before And Afer The Opening Of Shanghai-Hong Kong Stock Connect Program

In the period of economic globalization and financial liberalization,countries gradually liberalize their control over capital markets,and international capital has been able to flow freely day and night across the world markets,thereby enhancing the financial markets trading activity and tightness.In addition,the increasing cooperation between countries and the deepening of trade levels have strengthened and consolidated this trend.In this environment,a single stock market in the past can no longer operate as an individual,and a financial market in a country or region is affected by fundamentals,such as the level of economic development in the country or the region.It is also affected by the level of economic development or financial markets in other countries.Thus,these can lead to the trend of convergence between the stock market in these countries.Over the past decade,there have been several major events in the financial markets,such as the 2008 US subprime mortgage crisis,the 2010 euro debt crisis and the mainland China market crash in 2015,which have affected the global capital markets turbulence.With the opening of Shanghai-Hong Kong Stock Connect Program on november 17,2014,the strength of their co-movement will occur change to some extent.Thus,under this new rules,the study about the co-movement between the two markets is of practical significance.This study can also be with the Shenzhen-Hong Kong Stock Connect Program to explore ideas for the next step in the internationalization of China's securities market together,to provide policy programs for Shanghai-London Stock Connect Program.This paper first combs the research about the co-movement research of stock market at home and abroad according to the research method,which is divided into three aspects: the theoretical basis of co-movement,the transmission path of co-movement,and the econometric method of co-movement test.On the basis of combing,the definition,reason,theoretical basis and conduction path of co-movement are summarized,and in this part of the co-movement transmission channels,the analysis is increased about the fundamentals of trade and capital flow between Shanghai and Hong Kong market.Second,the Shanghai Composite Index and the Hang Seng Index closed for the two time periods from February 4,2002 to November 16,2002,and November 17,2014 to June 30,2016.The price index is divided as the representatives of the two stock markets,and the correlation between the yield and the volatility of the yield as the co-movement of the measurementindicators.Respectively,to explore the whether the co-movement between the Shanghai-Hong Kong stock market exists or whether the co-movement between the two places is strengthened or weakened,the test study is important about the two time period of the co-movement effect,and the direction of the co-movement between the two stock markets is clear.In the process of co-movement test study,VAR model,variance decomposition,impulse response function and DCC-GARCH model are used to analyze the co-movement.Finally,the correlation coefficient and volatility of daily returns are used to analyze the co-movement between Shanghai Composite Index and Hang Seng Index,and the results of model are analyzed in details.The empirical conclusion is that before the opening of Shanghai-Hong Kong Stock Connect Program,the correlation coefficient of Shanghai and Hong Kong stock market is 0.4129,and after the opening,the correlation coefficient increased to 0.5375.The maximum value about dynamic relationship between stock market in Shanghai and Hong Kong reached 0.6516 after the opening of Shanghai-Hong Kong Stock Connect Program,which was higher than the previous 0.6409.Whether it was from the standard deviation(0.0209 before opening 0.4045,after opening 0.0409)or from the mean(0.3686 before opening,after opening 0.5221).Point of view,after the opening of Shanghai-Hong Kong Stock Connect Program,the two stock market dynamic correlation coefficient are more stable,which shows that stock market between them did not show significant fluctuations.In general,after the opening,Shanghai and Hong Kong stock market co-movement is enhanced.From the perspective of the impact,the contribution rate of the Shanghai Composite Index to the Hang Seng Index yield increased from 18% to nearly 30% before the opening,and the contribution rate of the Hang Seng Index to the Shanghai Composite Index yield was 0.02% increased to 0.6%.Obviously,the impact of Shanghai stock market on China's Hong Kong stock market is gradually increasing,while the impact of China's Hong Kong stock market on the Shanghai stock market,although weaker than the former,but after opening its impact on the Shanghai stock market has also increased.On the basis of the empirical conclusion,in order to continue to improve the influence and status of China's mainland securities in the international financial market,this paper also puts forward the corresponding suggestions and the stage goals.