Empirical Study On The Magnetic Effect Of Chinese Stock Market

China's stock market began to introduce restrictions on the rise and fall since 1996,but people have different opinions about it.Especially "thousand shares suspended" and "thousands of stocks were stopped” in 2015 made the academic circles have big differences on the effect of price limits system in practice.In order to suppress the investors "herding",avoid chasing rising stocks and reduce the volatility of the stock market,our stock market began to implement the circuit breaker since January 1,2016.The purpose of this paper is to study the influence of the circuit breaker on the security market and the necessity of the two systems.This paper makes an in-depth study on the magnetic effect of Chinese stock market.First of all,this paper summarizes magnetic effect,price limit system and circuit breakers.Secondly,the sample is divided into normal stage,bull stage and market crash stage.We collect the 5-minute-high-frequency data of CSI 300 index and the GEM index in the three phases,then make correlation and stability test.According to the characteristics of the data,the AR-GARCH model with dummy variables is identified as the main model.Subsequently,this paper makes an empirical analysis of magnetic effect on China's stock market and verifies the magnetic effect of the CSI 300 index and the GEM index in normal stage,bull stage and market crash stage.Among them,the stock market crash stage is divided into stages including magnetic effect and not including,and the two stages' magnetic effect sizes were compared.The results show that the overall trend of the magnetic effect of the CSI 300 index and the GEM index in the rise and fall is same.With the increase of the magnetic absorption threshold,the exponential magnetic effect firstly enhanced and then weakened,and finally reached the strongest.In the same magnetic threshold,the magnet effect in the bull market stage and the stock market crash stage is stronger than that in normal stage.The largest magnetic effect of GEM index in the bull market and market crash stage is stronger than CSI 300 index.CSI 300 index,as a representative of large cap stocks,has the role of leading the securities market.The introduction of the circuit breaker under the price limit system,not only did not play a role in stabilizing the market,but exacerbated the volatility of financial markets.Therefore,it is not suitable for China's stock market to introduce the circuit breaker mechanism under the condition of the existence of the price limit system.