An Empirical Study On The Co-movements Between Shanghai Anod Hong Kong Stock Markets Under The Background Of Shanghai-Hong Kong Stock Connect

With the global financial integration and the rapid growth of China's economy,China's capital market is actively and orderly pushing forward the process of opening up to the outside world,showing an increasingly close linkage relationship with capital markets in other countries(regions).Under the Background of Shanghai-Hong Kong Stock Connect policy,the co-movements between the Shanghai stock market and the Hong Kong stock market are becoming closer.Therefore,with the continuous improvement of Shanghai-Hong Kong Stock Connect policy mechanism,study on the co-movements between Shanghai and Hong Kong stock markets is of great significance to maintain the stability of the stock markets and further open the capital market.This paper studies the co-movements between Shanghai and Hong Kong stock markets under the background of Shanghai-Hong Kong Stock Connect.First of all,research from the definition of the stock market co-movement and the theories of the stock market co-movements.Then,the empirical analysis is based on the daily closing prices of the Shanghai Composite Index and the Hang Seng Index from October 17,2008 to December 31,2019.Taking Shanghai-Hong Kong Stock Connect as a cut-off point,the sample data is divided into two stages:before and after the opening of Shanghai-Hong Kong Stock Connect.The VAR model,Granger causality test,impulse response function,variance decomposition,and DCC-GARCH model are respectively performed on the yield series of the two stages.The research results show that with the start of Shanghai-Hong Kong Stock Connect,the two markets have changed from a one-way mean spillover from Shanghai to Hong Kong market to a mutual mean spillover;the volatility spillover between the Shanghai and Hong Kong stock markets did not show a clear upward or downward trend in the initial stage of Shanghai-Hong Kong Stock Connect.It quickly fell to the lowest point and fluctuated sharply from July 2015 to July 2017.Since then,the volatility spillover effect has become stronger and stronger,showing an upward trend.Lastly,this paper combines the above theoretical and empirical studies to draw conclusions and make recommendations to financial regulators and market investors:financial regulators should gradually promote the process of opening the mainland stock market and improve Shanghai-Hong Kong Stock Connect trading mechanism.At the same time they should also promote the joint supervision of both Shanghai and Hong Kong regulators,make more efforts on risk prevention,and emphasize the importance of investor education to maintain a rational market investment ecology;investors must actively improve the level of professional investment,pay attention to build up portfolios of cross-market assets rationally,and enhance the ability to resist risks.