The Influencce Of SH-HK Stock Connect On The Tail Dependence Of Dual Listed Companies

Tail dependency is the conditional probability that when one variable is extreme,the other variable also has extreme value.Compared with the correlation coefficient,the tail dependency is more suitable for the statistics of financial data with peaks and thick tails.Tail dependency is reflected in this paper as the probability that a stock will soar or plunge in another market when it soars or plunges.In November 2014,Shanghai-Hong Kong stock connect was officially opened,and the linkage between the A-share market and the Hong Kong stock market continued to strengthen.The Shanghai-Hong Kong stock connect not only brings more convenient investment channels for individual investors,but also expands the scope of investment for public fund companies.However,due to the ability to research,the Shanghai-Hong Kong-Shenzhen Fund is not willing to invest Hong Kong stocks with heavyweight.Therefore,this paper studies the influence of Shanghai-Hong Kong stock connect on the stock price fluctuations of Shanghai and Hong Kong stocks,and finds a method to construct a portfolio of better return and less extreme system risk.Firstly,based on multivariate statistics,this paper obtains the probability distribution function based on Dirichlet parameter model and gives statistical inference.The parametric model can describe the tail dependency well.Then,this model was applied to calculate the tail dependency index of stock returns of dual listed companies in Shanghai and Hong Kong,and to examine the possible influence of Shanghai-Hong Kong stock connect and explore industry differences.Finally,the regression model will be used to find the influencing factors of tail dependency,and the paper will use this conclusion to construct the Hong Kong stock investment strategy.The main results of this paper include: from the demension of time,the tail dependency of various industries is getting higher and higher,but in the first year after the opening of Shanghai-Hong Kong stock connect,the tail dependency declines in 2015-2016,and by the end of 2017,the tail dependency finally became higher.From the demension of industry,the tail dependency of the financial industry is smaller than other three industries such as manufacturing operations.The main factors influencing the tail dependency are: the gap between the fluctuation of the Hang Seng Index and the Shanghai Stock Index,the fluctuation of the AH premium index,and the net inflow of Hong Kong stocks connect.Finally,this paper chooses Hong Kong stocks with top ranking in net capital inflows of Hong Kong stock connect to build Hong Kong stock portfolios.The portfolios have high yields and low tail-dependencies.So the investment strategy has certain effectiveness.