A Study On The Application And Co-movement Effect Of Chinese And American Stock Market

The economic globalization and financial liberalization make the co-movement effect between the stock market of each country become more and more obvious,and the financial risk will be spread in a wider range,faster speed and stronger destructive power.In the context of the increasingly complex international economic,financial environment and the development of China's Capital and Financial Account gradually opening up and the stock market internationalization,the study of the co-movement effect between China and US stock market,is to provide quantitative basis and reference value for the financial regulatory authorities to safeguard national financial security and make macroeconomic policy,but also has practical significance for risk management,portfolio investment strategy,asset allocation and a series of financial practice.In this paper,based on the wavelet method,we choose the Shanghai and Shenzhen 300 index and the S&P 500 index return series data and study the co-movement effect between China and American stock market from the two dimensions of time domain and frequency domain.Then,we analyze the influence factors of the co-movement effect of China and American stock market,and explore its complex mechanism and operating rules.Finally,combining the maximal overlap discrete wavelet transform(MODWT)and the mean variance portfolio theory framework,we propose MODWT portfolio model and analyze the feasibility and advantage of the model.The main work and conclusions are as follows:Firstly,the paper analyses the co-movement effect between China and the US stock market based on wavelet method.(1)We find that the co-movement effect is low in short time scale and the co-movement effect is obvious in long time scale,the US occupies a leading position during the subprime crisis from the wavelet square coherence chart drawn by the continuous wavelet transform.(2)Based on Shannon entropy-related criterion,MODWT is used to decompose the yield sequence into five different time scale components.Then we analyze the dynamic wavelet correlation of the five time scale components.The results show that the co-movement effect is different in different time scale and the co-movement effect is stronger with the increase of the time scale.(3)Based on the results of wavelet multi-resolution analysis,the linear and non-linear Granger causality test are used to analyze the direction of co-movement effect between Chinese and American stock markets in five time scale.The results show that the Grainger causality relationship between China and the US stock market is bidirectional.Secondly,analysis of the influencing factors of China and US stock market co-movement effect.The macro economic variables and market contagion indexes were used to conduct multiple regression analysis on the co-movement effects of five time scales.The results show that the main factors affecting the co-movement effect of China and the United States are the trade intensity and market contagion.Market contagion only has a significant impact on the co-movement effect in short-term time scale.Thirdly,construction of portfolio is based on co-movement effect of China and the US stock market.Construct MODWT portfolio model and compare it with the control group,we find that the portfolio effect of MODWT portfolio model is better,which can bring higher returns and Sharp ratio.Investors with different risk preferences can bring higher utility than the mean-variance portfolio.At the same time,different time scales of the investment effect there are significant differences,investors need to choose carefully.