Research About Dynamic Interrelation Of AH Shares

Research on integration and information flow problems between therelevant markets or related subjects is the main aspect to study of dynamiccorrelations in the financial field. Compared with other major capital market,correlation between Mainland and Hong Kong market is much higher. Theyhave a natural link.This article uses data includes both indices (HSCEI CSI300SSE50and TheSZSE Component Index) and individual AH stocks during April2009and July2014, to make the research on integration and information flow. Estimatethe120day moving average of the dynamic correlation coefficient through thediagonalizable BEKK model to describe the market integration level; analyze theinformation flow direction on the mean spillover by the Granger causalitytest based ECM model; analyze the volatility spillover effects of individual stocks andindices through BEKK model; and observe the effects of policy on the marketintegration level and spillover effect.The conclusion is that, in the sample interval, from the point of the index,the integration level between mainland and Hong Kong market has beenincreasing since April2010, there is no mean spillover effects between the twomarkets, but there is a bidirectional volatility spillover. For the individual AHstocks, the mean information generally flows from mainland to Hong KongMarket, and the volatility spillover effect is bidirectional. Policy (stock indexfutures, Hong Kong and Shanghai Tong) had no effect on the mean spillovereffects, but strengthened the volatility spillover effects, also improved theintegration level between the two Markets.