| As Economic globalization and financial integration deepen with the development of foreign trade, direct investment and capital flows, portfolio pricing in capital market should be based on a global information set. Return and volatility of a stock market are not only influenced by their own previous values, but may also be influenced by previous return and volatility of another stock market, which is called stock return and volatility spillovers. With China's economic and financial development, reform and opening up, China's stock market and world capital markets become more and more integrated. Since U.S. stock market represents a mature capital market, the spillovers between China and US stock markets is particularly interesting. The return and volatility spillovers between China and US stock markets are valuable to macro-evaluation of market integration and micro-decision of portfolio investment.In this paper, on the basis of a theoretical and empirical review of relevant studies, I systemically analyzed the nature and reason of return and volatility spillovers between different stock markets, and further analyzed whether such spillovers exist between China and US stock markets. Using samples of SHCOMP and SPX during 1990-2009, I build a VAR-BVGARCH model to test the size, direction and change of return and volatility spillovers between China and US stock markets. And the empirical conclusion is: there is significant return and volatility spillovers from US market to China market and such spillovers is increasing. There is no significant return and volatility spillover from China market to US market in the entire sample interval, but within the interval such spillover shows an upward trend.I further analyze the empirical result from three aspects: fundamentals, capital demand and supply, and expectation. I found WTO accession, the initiate of QFII and non-tradable shares reform accelerates the widening and speeding up of China and world stock markets' integration.In the end of this paper, I analyze the implication of China and world stock markets' integration, and give corresponding suggestions both from the authorities' perspective and from the investors' perspective. |
