| As China’s capital markets and foreign capital market’s contact more and more closely? The linkage of China’s stock market and other stock market are now concerned by scholars. From the perspective of the world, Emerging markets have become a part of the world economy which cannot be ignored. A large number of international investors through direct investment or portfolio investment pay their attention on emerging markets. China as the leader of Asia’s emerging markets has significant impacted on the Asian economy. Therefore, China’s stock market and the Asian stock market linkage has become the focus of research. The purpose of this study lies on the analysis of China and Asian emerging stock market linkage to explore inter-market linkage evidence to provide a reasonable policy and investment advice to governments and investors.In this paper, two aspects were studied. First of all, Granger causality test was used in proofing long-term linkage of China and Asian emerging stock markets. This section includes the yield correlation and volatility spillover. Then difference before and after the financial crisis was investigated. Finally this paper uses moving window of Granger causality test to observe the changes during different periods. The second part of this paper applies the VAR and BEKK-GARCH model to observe the short-term correlation between China and Asian emerging stock market. Time-varying correlation coefficient was calculated at the same time, and optimal portfolio proportion was calculated which provides the suggestions for the investors.This paper draws the following conclusions:(1) Before the subprime crisis, China’s stock market and emerging stock markets have no correlation. After the subprime crisis, China’s stock market and emerging stock markets have correlation in Yields and weak correlation in volatility. (2) Post-crisis era, China’s stock market guides Indonesia, Korea, Malaysia and Taiwan stock market in yields. Emerging Markets Index, Hong Kong stock market guides China’s stock market in yields. (3)Post-crisis era, Volatility spillover effects is proved between China’s stock market and Emerging Markets.(4) The correlation coefficient showed that the correlation between China and Hong Kong are strongest and most stable, with the weakest in India. According to the best investment portfolio, the combination of investment in China and India are the best choices, and the combination of investments in China and emerging markets index need to more frequent operation to adjust portfolio proportion. |
