The Linkage Effects Of China Andother Bric Countries’ Stock Markets

Since the U.S. subprime mortgage crisis in 2008, the BRIC countries have become the main engine of global economic growth and the main growth point of the global economic development, the outbreak of the debt crisis in EUROPE further highlights the advantages of this development. The rapid development of the economy of the BRIC countries also make it become a new geopolitical power. With the QFII and QDII introduced, China’s capital market from closed to open gradually, and increasingly close world capital markets. Thus, It has important practical significance that explore the correlation between China and other BRIC stock markets.Firstly, the article defines the connotation of the stock market linkage, and analyzes the theoretical basis of the stock market linkage from the aspects of economic theory, market contagion theory, investment portfolio theory, economic globalization and financial liberalization. Secondly, the paper has carried on the comparative analysis between the China’s stock market and the other BRIC countries’ stock market from the basic statistical characteristics, price trends, the yield volatility and correlation relations. Thirdly, as the US subprime mortgage crisis in 2008 on behalf of the major event, this thesis were selected Chinese CSI300 index, India BSESN30 index, the Russian RTS index, the Brazilian Bovespa index and the South Africa index as the research objects, using econometric models analyze the stock market linkage effects between China and the other BRIC countries from the before, during or after the occurrence of crisis, liking respectively use the vector autoregression model, Johansen Cointegration, Granger causality test, impulse response function and variance decomposition stusdies to explore effect relationship of lag phase, Long term equilibrium relationship, cause an effect system between the China’s stock market and the other BRIC countries’ stock market. Finally, using the ARCH/GARCH model to study the volatility spillover effect between the stock market of China and India, Russia, Brazil, South Africa.The empirical research shows, over time, that the stock market linkage effects between China and the other BRIC countries have a significant increasing trend, and the Russia stock market have more pronounced affection on China’s stock market. Therefore, investors should choose a suitable portfolio strategies to cater to the market changes and avoid market risk, realizing the maximization of investment returns. Governor should also control the impact of the financial crisis timely and make effective economic policies, to prevent the influx of hot money and protect the smooth development of capital market and safeguard the rights and interests of investors.