Research On The Linkage Effects Of China And Vietnam Stock Markets

With the deepening of bilateral trading tie between China and Vietnam,the relationship between the stock markets of the two countries has become increasingly closer.The purpose of this paper is to discover the linkage rate between china and Vietnam stock market's indexes and the volatility spillover effects of them.Besides the entire period,5 periods are taken into consideration:Subprime Mortgage Crisis,the double crisis(Subprime Mortgage crisis and the European Debt Crisis),post-crisis,crash of stock market and post-crash.Firstly,this research makes a systematic and comprehensive discussion on the linkage effects of the stock markets with the literature analysis method.It includes three major theories:efficient market hypothesis theory,the financial contagion theory and Core-Periphery theory.Secondly,according to the qualitative and quantitative research methods,the research analyzes the internal mechanism and external performance of the linkage between China and Vietnam stock markets.Finally,there is a series of empirical test methods including cointegration test,Granger causality test,Impulse Response analysis and DCC-GARCH measurement.There are various degrees of volatility spillover effects at different times rather than long-term benefits spillover effect between China and Vietnam stock markets.Impacts of the international environment like financial crisis can strengthen the linkage between Chinese and Vietnamese stock markets as well as internal factors such as Chinese stock market crash.Stock market with larger volatility is more likely to have an impact on countries with less volatility.From the linkage trend,with the cooperation between China and Vietnam,the stock markets of the two countries are less affected by other international markets such as US stock market.Meanwhile,linkage effects between the partner countries is becoming more and more significant.After measuring linkage between the two countries' stock markets,this study proposes suggestion to policy makers:open the Chinese stock market smoothly and orderly,improve the information disclosure system and take precaution to prevent international financial shocks.To investors,it is necessary to pay attention to linkage between China and Vietnam stock markets,they should prepare for risk diversification in the portfolio,it's better to regard one country's stock market as a reference while make prediction of another stock market.