Co-Movement In Different Industry Indexes After Stock Reform In China

This paper selects eight sectors listed in A-share market with a bigger market capitalization as the samples of the analysis of the cascading effect of stock blocks in China. At the same time, the author divides the sample intervals into four different stages, according to three representative events based on the business cycle feature. These stages are stage of preliminary accomplishment of the reform of the shareholding system, stage of bull market, stage of bear market and stage of late turbulence and adjustment. Specifically, SPSS software and Eviews software are adopted in order to give an analysis of hierarchical clustering, price cascading effect and fluctuation effect of rate of return of the eight stock blocks in different stages. And finally, dynamic characteristics of cascading effect and one-way leading relationship among A-share blocks in different stages are gained.The present paper empirically explores the change of cascading effect of A-share blocks in China, which dates back to the economic crisis since the beginning of the reform of the shareholding system in2005until now. It proves that the cascading effect of blocks is comparatively obvious after the reform of the shareholding system, whereas it is weaker in the stage of bull market where the price of all different kinds of blocks goes up. The cascading effect of bear market had been reinforced after the widespread of subprime crisis. And also, there are not only one-way leading, but also two-way leading relationships among the stock blocks. The cascading effect of stock blocks during the forthcoming stage of turbulence and adjustment after crisis are still very obvious. It presents a sort of investment strategy and management method, which comes from an investor and decision maker from higher to a lower power, can get from the dynamic variation of the cascading effect of these eight stock blocks.