The Relationship Between International Hot Money And Chinese Stock Market

International hot money is a kind of speculative short-term capital in the global market,which is only for high returns.In recent years,with the strengthening of economic globalization and financial liberalization,a large number of hot money has chance to speculate into the domestic market.Therefore,the large-scale flow of international hot money is bound to have a significant impact on Chinese capital market,especially on the stock market.In this paper,the empirical data is from February 2000 to January 2017.Based on the traditional linear Granger causality test,we further use the nonlinear Granger causality test to explore the causal relationship between the international hot money flows and Chinese stock market from the perspectives of level value.Then,in order to study the influence of hot money flows on Chinese overall stock market from the perspectives of volatility,we use GARCH-MIDAS model to carry out the research.And on this basis,we further divide the stock market into industrial,commerce,real estate,utilities and other industries to explore the impact of international hot money flows on the volatility of different industries.Finally,the paper summarizes the empirical conclusions and puts forward the policy recommendations about preventing the impact of hot money on the stock market as well as the next research prospects.The empirical results of this paper show that:the level values of hot money and stock market are not mutually the Granger causalities for each other.However,except the real estate industry stock index,the level value and volatility of hot money have significantly positive impacts on the long-term volatility of Chinese overall stock market and other industry indices.The empirical result of the real estate index is special:only the volatility of hot money has significantly positive impact on its long-term volatility.However,in different time period,the trends of long-term volatility caused by hot money and the total volatility of Chinese stock market may be different,especially during the high volatility period.