Analysis Of The Impact Of Shanghai-Hong Kong Stock Connect On The Volatility And Liquidity Of Shanghai Stock Market

It has been seven years since the Shanghai-Hong Kong Stock Connect was launched in November 2014.The implementation of this system is not only an important step in Chinese opening to the outside world,but also a brave exploration of Chinese deepening financial market reform.Over the past seven years,our country has undergone earth-shaking changes,and the world environment is also facing unprecedented severe challenges.In this special period,it is particularly important to study the effects and possible deficiencies of Chinese opening-up policy.This article explores the impact of Shanghai-Hong Kong Stock Connect on the volatility and liquidity of Shanghai stock market.The content of this paper is to study not only before and after the opening,but also after the happening of emergency which is called the COVID-19 epidemic,what impacts will Shanghai-Hong Kong Stock Connect have on Chinese stock market.After reading a large amount of literature,this article selects the Difference-in-Difference model,based on the quasi-natural experiment,and controls the time effect and industry effect in the empirical process,and respectively studies the changes in the experimental group relative to the control group after the opening of the Shanghai-Hong Kong Stock Connect and under the COVID-19 epidemic.Finally,in order to maintain the robustness of the results,this paper constructs the PSM-DID model to correct the defects of the original model,and finally draws the following conclusions:(1)The opening of Shanghai-Hong Kong Stock Connect significantly reduces the volatility and liquidity of the Shanghai stock market.(2)Shanghai-Hong Kong Stock Connect under the COVID-19 crisis has a weakening effect on market volatility,but the short-term effect is stronger than the medium-term effect;it also has a weakening effect on market liquidity,and the short-term effect is as significant as the medium-term effect.Based on the above conclusions,this article puts forward the following policy recommendations:(1)Improve the degree of market integration between Shanghai and Hong Kong stock markets and promote the opening of capital markets in a planned way.(2)Guide the market to cultivate value investment concepts and increase the proportion of domestic institutional investors.(3)Strengthen the supervision of the flow of funds of Shanghai-Hong Kong Stock Connect,and improve the construction of related supervision systems.