Research On The Impact Of SH-HK Stock Connect And SZ-HK Stock Connect On The Price Discovery Of A And H Shares

The Shanghai-Hong Kong Stock Connect was approved on April 10,2014 and opened on November 17,which is a milestone in the connection between China’s capital market and the international capital market.It is the most important international strategy after QFII(2002),RQFII(2011)and Hong Kong stocks through-train policy.It plays an important role in promoting the internationalization of China’s capital market and the internationalization of the RMB.Shenzhen Stock Exchange is also an important part of China’s capital market.After two years of operation of Shanghai-Hong Kong Stock Connect,Shenzhen-Hong Kong Stock Connect was officially opened on December 5,2016.However,the effect of any long-term reform policy implementation is uncertain,and this uncertainty is the focus of investors and scholars.As more and more domestic companies issue stocks in the Hong Kong market,the A+H cross-listed stock is becoming more common.The issue of stock price discovery in the two markets has become an important research area for many scholars.Price discovery is the most important function of the financial market.Therefore,the main purpose of this paper is to explore whether Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect have an impact on the price discovery of A and H shares,and the impact of approved policy messages on A and H share price discovery.This paper takes A+H cross-listed company stocks as the research sample,and uses the cointegration test,error correction model and Granger causality test to study the price discovery function of A and H shares.After data processing,49 Shanghai-Hong Kong Stock Connect shares and 12 Shenzhen-Hong Kong Stock Connect stocks were selected for research in 107 cross-listed companies.The study on the announcement effect of Shanghai-Hong Kong Stock Connect found that the news of the approval of Shanghai-Hong Kong Stock Connect did not strengthen the linkage of A and H shares,but aggravated the stock price fluctuations of A and H shares.A study on the Shanghai-Hong Kong Stock Connect found that only three companies had a cointegration relationship before the opening of Shanghai-Hong Kong Stock Connect,and increased to 19 after opening.This shows that the opening of Shanghai-Hong Kong Stock Connect has greatly strengthened the linkage of Shanghai and Hong Kong stock markets.The error correction model showthat the price discovery ability of the Hong Kong stock market is stronger after the opening the Shanghai-Hong Kong Stock Connect.The Granger causality test cannot prove that the A-share yield leads the H-share yield or the H-share yield to leads the A-share yield.rate.A study on the Shenzhen-Hong Kong Stock Connect found that before the opening of Shenzhen-Hong Kong Stock Connect,there were two companies have cointegration relationship.After the opening of the Shenzhen-Hong Kong Stock Connect,there were three companies have cointegration relationship.From the Shenzhen-Hong Kong Stock Connect transaction data,investors are more inclined to invest Wuliangye,Gree Electric,Midea Group and other white horse stocks,the trading volume of cross-listed stocks is low,so the linkage of A and H shares of cross-listed companies has not been strengthened.The error correction model shows the price discovery ability of H-share market weakened after the opening of Shenzhen-Hong Kong Stock Connect,Shenzhen market price discovery ability increased,Granger causality test shows that after the opening of Shenzhen-Hong Kong Stock Connect,the relationship between the two stocks’ yields has strengthened.Finally,based on the results of empirical research,several suggestions for China’s stock market development and the Shanghai-Shenzhen Hong Kong-connect mechanism are proposed:First,strengthen investor education and guide investors to value invest;second,expand the scope of Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect program’s investable target assets;third,change the positioning of China’s stock market with financing as the main function,from incremental Development to quality development.