Analysis Of Returns Autocorrelation And Linkage Of Shanghai,Shenzhen,and Hong Kong Stock Markets Based On Quantile Regression

Since China’s accession to the World Trade Organization in 2001,the systems of Shanghai-Hong Kong Stock Connect,Shenzhen-Hong Kong Stock Connect,Cross-border Finance Connect and Exchange Connect have been introduced in an orderly manner,which has promoted the deep integration of the financial markets of the Mainland and Hong Kong.Under this background,it is of great theoretical and practical significance to analyze the autocorrelation and linkage of the returns of Shanghai,Shenzhen and Hong Kong stock markets in an all-round and multi-angle way,which is conducive to understanding the overall operation of China’s stock market.In this paper,Shanghai Composite Index,Shenzhen Composite Index and Hong Kong Hang Seng Index are selected to represent the overall development of Shanghai,Shenzhen and Hong Kong,respectively,and the daily closing price data from January2002 to February 2023 are selected to make an empirical study on the autocorrelation and linkage of returns in Shanghai,Shenzhen and Hong Kong stock markets.First of all,in order to reveal the nonlinear and heterogeneous characteristics of stock market return series at the same time,this paper combines the smooth conversion mechanism with quantile regression method to construct the smooth conversion quantile autoregressive(STQAR)model,and gives the concrete form,estimation and test process of the model,as well as the conditional quantile prediction and conditional density prediction methods,and studies the prediction effect of STQAR model through numerical simulation.Secondly,we use the STQAR model to study the autocorrelation of the stock market returns in Shanghai and Shenzhen,dig deep into the smooth conversion effect and heterogeneous effect of the stock market returns,and then predict the stock market returns on this basis,giving the conditional density prediction curve of the stock market returns;Finally,the quantile cointegration method is used to test the long-term equilibrium relationship between Shanghai stock market,Shenzhen stock market and Hong Kong stock market at different quantiles,and then a quantile error correction model is established to reveal the short-term dynamic adjustment characteristics of Shanghai and Shenzhen stock markets,and the specific orientation relationship between Shanghai and Shenzhen stock markets and Hong Kong stock markets is deeply explored through quantile Granger causality test.The research results show that: firstly,both numerical simulation and empirical research confirm that compared with the traditional smooth transition autoregressive(STAR)model and quantile autoregressive(QAR)model,the prediction effect of the STQAR model constructed in this paper is better.Secondly,the STQAR model confirms that there are significant smooth conversion effects and heterogeneous effects in the autocorrelation of daily returns in Shanghai and Shenzhen stock markets.The smooth conversion effect divides the fluctuation characteristics of stock market returns into two mechanisms,and the autocorrelation characteristics of different mechanisms are quite different.Heterogeneous effect makes the yield series show strong autocorrelation in extreme market environment,but weak autocorrelation in mild market environment.Third,regardless of the market environment,there is a long-term equilibrium relationship between Shanghai and Shenzhen stock markets and Hong Kong stock markets,that is,linkage,and there is a significant positive correlation;When the short-term fluctuation deviates from the long-term equilibrium,it will adjust to the equilibrium state,and the adjustment of Shanghai and Hong Kong stock markets is stronger than that of Shenzhen and Hong Kong stock markets.The adjustment of Shanghai and Shenzhen stock markets in extreme market environment is stronger than that in moderate market environment,and the long-term equilibrium relationship is more stable.As far as the specific guiding mechanism is concerned,the Shanghai and Shenzhen stock markets generally have a guiding role for the Hong Kong stock market in any market environment,while the Hong Kong stock market has a guiding role for the Shanghai and Shenzhen stock markets only in a depressed market environment.