The Effect Of Shanghai-hongkong Stock Connect Program On The Hongkong Stock Market’s Volatility

2014 April 10 th,the Boao forum held in Hainan. Li Keqiang, the premier of China was invited to attend the annual meeting of the opening ceremony and delivereda keynote speech. In his speech, Li Keqiang pointedout that China will focus on promoting a new round of high level opening to the outside world. The expansion of the service sector,including the opening of capital market is an important aspect. At the same time, he says Chinese will actively create conditions and establishing the Shanghai-Hong Kong Stock Connect program to further promote the China mainland and Hongkong capital market and the healthy development of two-way. Andin the same day, the China Securities Regulatory Commission and the Hongkong Securities Regulatory Commission officially approved to carry out a pilot interconnection mechanism, which further open the China’s capital market. Joint statement also pointed out that, from the date of this joint announcement to Shanghai and Hong Kong through official start, we need 6months time to prepare. In the same year in November 17 th.Shanghai-Hong Kong Stock Connect program ultimate set up successfully.This paper aims at studying the effect of Shanghai-Hong Kong Stock Connect program on the Hongkong stock market volatility. Taking GARCH modeling method,firstly select the HSLI and HSMI index within the programscope return as the research data, excluding the Hongkong stock systematicrisk caused by the fluctuation of the virtual variable to describe, to analysis whether its launch increased the volatility within the scope of the pilot of the two the index or not. Then randomly selected 10 representative stock for a similar study. Finally, by using the same method, after removing the influence of interest rate on the stock market,to analysis the effects of thisprogram on the Hongkong stock market volatility. Finally come to the conclusion that the Shanghai-Hong Kong Stock Connect program not only certainly increase the volatility within the scope of the pilot stock index and stocks, but also exacerbated the volatility of Hongkong stock market as a whole.This paper provides an empirical basis for our correct understanding the effect of the Shanghai-Hong Kong Stock Connect program and further behind the proposed the Shenzhen-Hong Kong Stock Connect program, further liberalization of China’s capital market provides reference.