Analysis Of The Impact Of A-shares In The MSCI Index On China’s Stock Market

On May 15,2018,the MSCI semi-annual review meeting officially announced the list of234 A-shares included in the MSCI Global Index,and announced on May 31 that the process of incorporating China’s A-shares into the index is progressing smoothly,with A-shares from June.The MSCI Global Index will be included on the 1st.So far,A shares have been initially included in MSCI in two steps on June 1 and September 3 in a two-step ratio.Since then,A shares have officially opened a new engine to enter the international stock market.The purpose of this paper is to study the impact of the “A-share formally incorporated into the MSCI Index”on the liquidity and volatility of China’s A-share stock market.Through the impulse response analysis and the method of variance decomposition,the empirical analysis is formally incorporated into the liquidity effect of the constituent stocks.In terms of volatility,the GARCH modeling method is adopted.Firstly,the yield of the MSCI component index included in the MSCI is selected as the research data.After eliminating the influence of the volatility caused by the systemic risk in the A-share market,the dummy variable is used to describe the “A share”.Formally included in the MSCI Index event to study its impact on the volatility of stock indices included in the range.Then,through the same method,after eliminating the impact of risk-free interest rates on the stock market,the impact of “A-shares included in the MSCI index”on the volatility of the entire A-share market is studied.Finally,it is concluded that the “A-shares included in the MSCI Index” will increase the liquidity and volatility to a certain extent in the short-term,but it has no significant impact on the volatility of the entire A-share market.This provides an empirical basis for us to correctly understand the impact of the initial process of “A-shares included in the MSCI Index”,which will provide a reference for further increasing the proportion and scope of the index and the inclusion of the A-share into the FTSE Russell Index.