Cross-border Stock Market Financial Crisis Contagion Effect Analysis

Reviewing the 90 years since the 20th century, the European Monetary System crisis in 1992-1993, East Asian crisis, Eastern European economies transition crisis, the U.S. subprime mortgage crisis in 2008 and the debt crisis of Greece in 2009, all of these crises happened in every corner of the world. The outbreak of the crisis are accompanied by the occurrence of contagion and the contagions happened more frequently, widely and destructive. With the evolution of the financial crisis, it has more influence on the real sector such as the economic, political and social stability. How the financial crisis evolve to economic crisis, how a country's internal crisis spread to other countries and how to set up an effective early warning mechanism about contagion, which are the common tasks of each countries which are trying to control the transmission mechanism of crisis and dealing with the financial crisis contagion.Firstly, this paper takes the 2008 global financial crisis as an example. Select the stock closing price of United States, Germany, Japan, Hong Kong and China. Then use the Granger causality test and impulse response function of econometrics to test specific ways of infection among countries. Based on the perspective of asset combination influence factors, the paper analyzes the impact the size of the financial contagion factor. The main conclusion is that the common factor in the impact of increased uncertainty and increased risk aversion will speed up the contagion effects of financial crisis. On the basis of the testing results and portfolio model, the paper selected some macroeconomic variables to analyze the contagions in different countries. Finally, the paper tests the transmission of contagion on the basis of a combination of risk factors to analyses each country's specific reasons for each transmission. The paper gives some suggestions to prevent of financial risks and strengthen the national economic security for our country.According to the paper, the change of the stock market correlation in times of crisis can provide some references for investors, risk managers and policy makers. China's opening up of capital markets should follow a gradual process. We should strengthen the construction of economic and financial cooperation with foreign countries. At the same time, we should increase our risks prevention capability. The market economy are not necessarily the most effective when the financial crisis contagion happens, So in this case should emphasize the importance of the government that give the guidance and support to the market. We should not only understand the impact of the contagion channel, but also should be specific to some intermediate goals, such as reducing the uncertainty of the people, the risk aversion of market participants and less common shocks.