The Research Of Co-movement Between Stock Markets Of B&R Countries And China

The stock market of China has experienced rapid development since its pilot program in 1989.It has been continuously open to the outside world,and its influence on the world’s stock market has become increasingly apparent.With a series of policies to open up the domestic financial market,it is worthy to research whether Chinese stock market has a linkage with the stock markets of emerging markets and how the comovement changes.The Belt and Road(B&R)initiative,was proposed by President Xi in September 2013 in order to solve the problem of overcapacity and insufficient domestic demand in China.It aims to strengthen economic and trade ties among various countries along the border,promote economic development and achieve win-win results.With the development of B&R,the trade scale and investment volume of its member countries have increased continuously,which promotes the financial links among countries’ capital accommodation,currency swap and trade settlement.In addition,it also lays a realistic foundation for the same direction fluctuation among stock markets in various countries.Hence,research of dynamic correlation between our stock market and the other member countries’ can help us maintain the stability of our stock market and the continuous progress of the B&R initiative.Firstly,this paper introduces the theory of stock market co-movement.And based on the economic fundamentals hypothesis and market contagion hypothesis,we made a concrete analysis on the reasons of co-movement between Chinese stock market and the member states of B&R.Then,the paper selects the stock index return rate of ten countries which have high trade volume with China as the research object.The research period is from January 1,2007 to January 23,2020.With the aid of time difference design,this paper uses DCC-GARCH model to investigate the dynamic correlation between China and the sample country’s stock market.The results show that the co-movement between China’s stock market and B&R members’ is quite different.And,there are periodic changes in the dynamic correlation between stock market of China and some other countries.It has the trend of “risingfalling-rising again”.Secondly,the financial crisis can strengthen the co-movement between Chinese stock market and other stock markets of B&R countries.What’s more,the impact of financial crisis on the co-movement is greater than that of B&R propose.Thirdly,during the whole sample period,the B&R does not significantly enhance the co-movement between Chinese stock market and stock markets of countries along the line.But excluding the impact of financial crisis on the co-movement,we can find that compared with the non-financial crisis which is from July 1,2012 to March 28,2015,the B&R has improved the correlation of stock markets between China and other countries.Considering historical events,world economic development situation and other background,we also discover: Before 2013,the occurrence of the financial crisis led to the improvement of the correlation between China’s stock market and other countries’;During 2013-2015,due to the turbulence of China’s stock market,the correlation between Chinese stock market and other stock markets gradually weakened;Since 2015,with the global implementation of the B&R,the deepening of trade cooperation between China and other countries and the further reform of the mainland stock market,the correlation between China’s stock market and this ten sample countries’ stock market has continued to increase or maintain at a high level.Based on this conclusions,this paper suggests: first of all,the government of every country should continue to expand the openness level of capital market;secondly,continuously deepen the construction of financial cooperation mechanism between China and other countries along the line,which can provide institutional guarantee for increasing the level of stock market integration between China and other countries along the belt and road;on the third place,establish a two-way exchange of financial risk prevention and early warning information sharing mechanism between China and the other members of B&R;last but not the least,investors should also strengthen learning,establish a correct investment mentality,and improve their own level.