Volatility-constrained Multifractal Detrended Cross-correlation Analysis: Cross-correlation Among Mainland China,US, And Hong Kong Stock Markets

This study focuses on multifractal detrended cross-correlation analysis of the different volatility intervals of Mainland China, US, and Hong Kong stock markets.A volatility-constrained multifractal detrended cross-correlation analysis (VC-MF-DCCA) method is proposed to study the volatility conductivity of Mainland China,US, and Hong Kong stock markets. Empirical results indicate that fluctuation may be related to important activities in real markets. The Hang Seng Index (HSI) stock market is more influential than the Shanghai Composite Index (SCI) stock market.Furthermore, the SCI stock market is more influential than the Dow Jones Industrial Average stock market. The conductivity between the HSI and SCI stock markets is the strongest. HSI was the most influential market in the large fluctuation interval of 1991 to 2014. The autoregressive fractionally integrated moving average method is used to verify the validity of VC-MF-DCCA. Results show that VC-MF-DCCA is effective. We compared the volatility-constrained multifractal detrended cross-correlation analysis (VC-MF-DCCA) method with volatility-constrained detrended cross-correlation analysis (VC-DCCA) method and the multifractal detrended cross-correlation analysis based on the empirical mode decomposition (EMD-MF-DCCA)method. Then we found that the volatility-constrained multifractal detrended cross-correlation analysis (VC-MF-DCCA) method was more accurate and this method can be connected with breaking news in stock markets intuitively.