An Analysis Of The Linkage Between Mainland And Hong Kong Stock Market

Hong Kong is an inalienable part of China.Since the return of Hong Kong in 1998,Mainland and Hong Kong have deepened in communication and cooperation,with more frequent activities such as tourism,consumption,trade and financial accommodation.In addition,Hong Kong is to some extent an bridge between Mainland financial market and the international financial market.This paper intends to explore the linkage between the two stock markets in the long run.In addition,the COVID-19 epidemic has had a huge impact on the global economy in the past two years.This paper also intends to explore the short-term changes of the linkage between the two stock markets.We hope to provide reference suggestions for government departments and investors,reducing market risk and promoting the healthy development of China’s financial market by means of studying the law of the linkage between the two stock markets.Based on the above problem orientation,this paper adopts CSI 300 index of Mainland stock market and Hang Seng Index of Hong Kong stock market,and selects weekly index closing price from early January 2006 to the end of August 2021,and daily index closing price from early October 2019 to the end of August 2021 as sample data.And then we construct the DCC-GARCH model.Through empirical research,the following conclusions are drawn:First,there is a long-term correlation between Mainland and Hong Kong stock markets.Second,the long-term linkage of the two stock markets gradually increased and jumped in 2018.Third,the long-term correlation between the two places change dynamically with time,especially some influential events such as the financial crisis will bring great impact.Fourth,during the COVID-19 outbreak,the linkage fluctuated sharply,and the correlation coefficient dropped to very low levels several times in the year after the outbreak.We have done a detailed analysis to the logic behind the level and change of the linkage between the two places.