Research On The Impact Of Shanghai-Hong Kong Stock Connect Program On The Liquidity And Volatility Of Shanghai Stock Market

The Shanghai-Hong Kong Stock Connect interoperability mechanism has been hailed by the Financial Times as the largest financial innovation since the birth of the Euro.It has explored a path that can be replicated and promoted,reshaped the new era of cross-border twoway interactive investment.After the opening of Shanghai-Hong Kong Stock Connect,the investor structure of the Shanghai A-share market has improved to some extent,and has continuously improved the level and depth of China's opening up.On October 12,2018,the Securities Regulatory Commission issued a trial operation regulation on the interconnection between the Shanghai Stock Exchange and the London Stock Exchange(hereinafter referred to as Huluntong).Meanwhile,the daily quota of Shanghai and Hong Kong Stock Exchange has been expanded four times.Therefore,before the formal operation of Huluntong,it is of great theoretical and practical significance to study the impact of the opening of Huluntong on the liquidity and volatility of Shanghai A-share market.This paper selects the weekly data of listed company stocks from January 3,2014 to November 30,2018,and eliminates the data of listed companies with data missing and financial industry,and prepares data for establishing PSM-DID model.Firstly,the matching variables are selected from the propensity score matching model from the two aspects of the listed company's basic information and financial data.The control group(non-Shanghai stocks through stocks)stocks are selected by the one-to-one neighbor matching for the experimental group(the stocks of Shanghai Stock Connect).After that,stock market liquidity is measured by Turnover,amortization spread(ILLIQ)and illiquid Amihud indicators.Stock market volatility comes from the standard deviation of stock price yield(Volatility1)and stock price fluctuation(Volatility2).measure.Finally,the state-owned and non-state-owned listed companies after the full sample and the property rights of listed companies are taken as the research object,and the influence of Shanghai-Hong Kong Stock Connect on the liquidity and volatility of the Shanghai A-share market is established.The research results show that for the entire Shanghai stock market,Shanghai-Hong Kong Stock Connect has increased the liquidity of the Shanghai A-share market,but reduced its volatility.After distinguishing the nature of property rights,Shanghai-Hong Kong Stock Connect has a significant impact on non-state-owned listed companies.It also draws a similar conclusion to the full-sample regression,that is,the opening of Shanghai-Hong Kong Stock Connect has increased the liquidity of non-state-owned listed companies and reduced their volatility..The influence of Shanghai-Hong Kong Stock Connect on the liquidity and volatility of state-owned listed companies is not significant.Based on the above empirical results,this paper proposes the following suggestions:(1)Strengthening the risk warning of foreign investors and guiding investors to invest rationally;(2)Increasing the regulation of stock price abnormal fluctuations and establishing a joint supervision platform;(3)Regulating information disclosure of listed companies Improve the stock market listing and delisting system;(4)Actively promote the operation of Huluntong and accelerate the gradual opening of the capital market.