Research On The Linkage Between China And The US Stock Market Under The Stock Market Cycle

In the context of economic globalization,the world economy has become more closely linked,and the linkage among different national stock markets has gradually increased.It is important to make good use of the stock market for promoting economic development.With the continuous deepening of the stock market reform,the correlation between Chinese stock market and the world economy is gradually changing.Studying the linkage relationship between China and the US stock market is of great significance for paying attention to the effectiveness of national policies and safeguarding national financial security.First of all,this paper analyzes the transmission mechanism between stock markets on the basis of "economic basic theory" and "market infection theory".Then,based on the existing research literature,the Chinese stock market is divided into four cycles,taking the daily trading data of the Shanghai Composite Index and the Nasdaq Index from December 20,1990 to October 31,2018 as a sample.And we study the linkage between China and the US stock market by sub-cycles.In this paper,the GARCH(Generalized AutoRegressive Conditional Heteroskedasticity)model is used to process data.Different GARCH models process data in different ways.In the quantitative calculation of correlation,the E-GARCH model with better fitting effect of financial time series data is selected and measured with Copula function.When observing the dynamic dependence structure of stock market with time,DCC-GARCH model can better capture the nonlinearity between sequences.The empirical results show that there is no long-term stable correlation structure between China and the US stock market,but its correlation has a relatively stable volatility range under the condition of China's stock market cycle,and the interval moves up step by step with the cycle.In the short-term,the economic downturn is not the reason for the changes in the relevant structural structure of the Chinese and US stock markets.The domestic market opening policy can effectively enhance the linkage between the Chinese and US stock markets in a short period of time.However,as the policy effect weakens,the linkage will return to the range of normal cyclical fluctuations.