With The Shanghai-hong Kong Stock Connect Program: A Research On The Volatility Spillover Effect Of Shanghai And Hong Kong Stock Market

In spite of the remarkable progress of China's stock market in recent years,there is still a gap with the mature stock market in Hong Kong.Due to the geographical relationship,the economic trade and financial sector exchanges has become more closely between the two markets,and the linkage effect between the two stock markets become more apparent.The Shanghai-Hong Kong Stock Connect Program(SHSCP)officially launched on November 17,2014.The establishment of the mechanism increases the interoperability between the two cities,and therefore lead to the impact on the volatility spillover effects between the two cities.The study of the volatility spillover effect between Shanghai and Hong Kong in the context of SHSCP will help the investors to optimize the investment portfolio,and guide the future macroeconomic regulation and control of China's capital market.This paper analyzes the changes of volatility spillover effect between Shanghai and Hong Kong stock markets,before and after the opening of SHSCP,in the aspects of existence,direction and intensity.The data from November 16,2013 to August 31,2016 is divided into four stages.And in each stage,the ARCH effect test is carried out on the Hang Seng Index,Shanghai Composite Index,S hanghai Stock Index and Hong Kong Share Index.The GARCH models for these indexes are built.BEKK-GARCH test is carried out.The The results proves the existence of the volatility spillover effect between Shanghai and Hong Kong stock markets after the launching of SHSCP.With the gradual opening of China's capital market,the impact from markets globally on China's securities market is gradually increasing.The possibility of risk transfer between financial markets is increasing as well.The situation requires China to further establish and improve the financial market regulatory mechanism to cope with international capital shocks.