China's Mainland And Hong Kong Stock Market Linkage Research

With the " Shanghai-Hong Kong Stock Connect Program" on November 17, 2014 formally implemented,it provides a new channel for the domestic and foreign capital flowing, marking the connection between the mainland and Hongkong stock market to achieve a stage of progress.However, Whether "Shanghai-Hong Kong Stock Connect Program" can strengthen the degree of integration between the mainland and Hong Kong stock market has aroused people's wide attention.To solve this problem, this paper takes the "Shanghai-Hong Kong Connect Program" incident as the starting point, from the perspective of both qualitative and quantitative analysis. On the basis of the theory of economic base and capital flow theory, Combined with the actual situation of the two markets,this paper puts forward its hypotheses;(1)before the launch of the shanghai-Hong Kong Stock Connect Program, there was a link between the mainland and the Hong Kong stock market, but it was not obvious;(2)after the launch of the shanghai-Hong Kong Stock Connect Program, there was an obvious co-movement of the mainland and Hong Kong stock market.In the quantitative research, the Shanghai Composite Index, Shenzhen Component Index, Hang Seng index used as samples, using the daily closing price data of each stock index from October 16, 2006 to August 29, 2016, referring to the error correction model of Mohsen Bahmani-Oskooee and Altin Tankui, Omar M. Al Nasser and Massomeh Hajilee, and the DCC-GARCH model, a concrete empirical study was conducted from both static and dynamic aspects for the study hypotheses.In the static analysis,based on basic statistics and correlation coefficient,it can have a preliminary understanding of the link between the stock markets of the two markets before and after the launch of the Shanghai-Hong Kong Stock Connect Program;and then this paper uses the error correction model to compare the differences between the two models before and after " Shanghai-Hong Kong Stock Connect Program" to further explore the link.In the dynamic analysis, the DCC-GARCH model is constructed to analyze the dynamic correlation coefficient of different stages, and the conclusion is proved. The results show that the link between the two stock markets before the launch of the Shanghai-Hong Kong Stock Connect Program is not obvious while the stock market showed significant co-movement after the Shanghai-Hong Kong Stock Connect Program,namely "Shanghai-Hong Kong Stock Connect Program" has the function of enhancing the linkage between the mainland stock market and the Hong Kong stock market; the linkage between the two stock markets has the characteristics of time-variant; In the " Shanghai-Hong Kong Stock Connect Program" , the Hong Kong stock market reflects a more mature sound.Finally, according to the empirical results, combined with "Shenzhen-Hong Kong Stock Connect Program", RMB's internationalization, the fully open capital market ,etc. from the angle of investors, regulators, listed companies, this article recommends that investors need to be more careful investment of Hong Kong stock market, regulators should strengthen cooperation and protect private investors through the establishment of collective litigation system, the listed company can promote the mixed ownership of state-owned enterprises reform through drawing lessons from listed companies in Hong Kong, etc.