On The Stock Market Dependence With China Characteristic Information

After recent financial crisis, financial asset clustered and fell together, although there was not significant dependent relationship detected in academic research. It is an indisputable fact that the correlation and dependence between financial asset and market is far more beyond our current knowledge. On stock market studies, in the current “Big data” world, the complexity and wide variety information calls for research on the particular kind of information and its effect on the stock market. Thus, we could further study the relationship and dependence among financial asset to detect the information diffusion pattern in financial market. To achieve this objective, exiting data sources and analytics required to be improved.This paper focuses on the China characteristic information in the complex information environment, to empirically research on the relationship of China characteristic information with stock market, and further study information diffusion pattern regarding to different China characteristics in stock market. Both cross-sectional and time series data are applied with measuring dependence from micro indicators, and further studied the on the macro level dependence related to China unique phenomenon.In micro level study, we choose political connection as information which is particular China pattern. By non-parametric analysis, we conclude different political connections resulted in different stock performance. Then we considered stock analyst recommendations as aggregated information proxy, applying event study to test the stock reaction to information controlling for political connection and ratings. We discovered that different political connection affect stock return both on the time and scale of abnormal return. In testing for macro level dependence, we introduce empirical copula approach with stock, real estate and gold market. Our result detected univariate dependence among the three market although they are pairwise independent. Finally, we constructed an agent-based artificial stock and housing market to test the stock market reaction with housing market policy based on China characteristics. Based on the above research, we conclude that China characteristic information do have effect on the financial market from both micro and macro level, and channeled between them. Thus, we need to consider these characteristic in studying China financial market issue.