An Empirical Study On The Fluctuation Of Shanghai And Shenzhen Stock Markets Under The Interconnection Mechanism

The stock market is an important part of the capital market and a barometer of one country's economy.With the rapid development of capital market,the degree of opening to the outside world of China's capital markets has gradually increased,on April 10,2014,the Shanghai-Hong Kong Stock Connect on the success of the pilot open,marked as an important part of capital market opening to the outside connectivity mechanism formally walked onto the stage.Since then,it has gradually opened Shenzhen-Hong Kong Stock Connect,and greater efforts of capital market opening to the outside world policy such as Shanghai-London Stock Connect also are under study.Therefore,study the effect of connectivity mechanism on Chinese stock market is very important which has far-reaching practical significance and theoretical value for the improvement of the existing interconnection mechanism,the opening of other interconnection mechanisms,and the opening of the Chinese stock market.This article conducts empirical research based on literature review and analysis of the status quo.The full text is divided into four parts,the first part systematically reviews and analyzes the results of relevant research on the opening up of the capital market and the stock market volatility and interconnection mechanism from both foreign and domestic levels,laying a solid foundation for the study of this paper;The second part defines the major concepts involved in this paper,such as the interconnection mechanism,and descriptive statistical analysis of stock market fluctuations in Shanghai and Shenzhen,which has laid a theoretical foundation for the study of this article.The third part is the focus of the article,through the empirical analysis,the research is carried out from the quantitative level of two aspects.First of all,from the micro perspective,on the basis of previous studies,consider the availability and intuition of the data,select the amplitude as a measure of the volatility of stock,P/E ratio and P/B as explanatory variables,and using the theory of natural experiment,through the establishment of double difference model to make a comparative analysis of changes in stock price fluctuations before and after the opening of the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect policies;Second,from the macro perspective,the amplitude of the Shanghai a-share index,the shenzhen a-share index and hang seng index are selected to represent the fluctuations in the stock market prices of Shanghai,Shenzhen and Hong Kong respectively,through the period before and after the opening of the interconnection mechanism.Two VAR models were established and Granger causality tests were conducted to compare and analyze the linkage changes between Shanghai and Shenzhen stock markets and Hong Kong stock market price fluctuations that represent international stock markets before and after the implementation of policies;The fourth part summarizes the research results and proposes policy recommendations for the healthy development of the stock market in Mainland China in the context of the implementation of the interconnection mechanism.This study finds that the results of the micro-level research show that the short-term policies of the interconnection mechanism are not obvious,but from a long-term perspective,the Shanghai-Hong Kong Stock Connect policy does play a role in reducing the volatility of the underlying stocks.Since the opening time of Shenzhen-Hong Kong Stock Connect is relatively short,its long-term policy effect remains to be further confirmed;From the macro-level findings,the opening of the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect policy has increased correlation between stock price volatility in Shanghai,Shenzhen and Hong Kong.On the whole,the two levels of research results show that the interconnection mechanism has the positive effect of stabilizing the stock market and promoting the internationalization of the capital market.Finally,based on the overall analysis,this paper puts forward relevant policy recommendations on the opening of China's capital market to the outside world.The main innovation of this paper is to explain in detail for the first time the concept of interconnection mechanism in the field of capital markets and quantitative empirical research on the policy implications of Shenzhen-Hong Kong Stock Connect.