The Study Of Co-movement Between Mainland Stock Market And Hongkong Stock Market

The stock market’s co-movement can be traced back to the 90 s of the last century,it is a very important economic phenomenon appears in different markets around the world,therefore it has becomea hot research topic which the domestic and foreign scholars study in recent years.Over the past few years,the Chinese government has been committed to develop more policy of economic openness to promote the development of financial markets,Under this background,the co-movement between mainland and Hongkong stock market is rising.If we can understand the laws and characteristics of the co-movement between the two stock markets,at the theoretical level,we can further enrich the financial market linkage theory,the effectiveness of market research and information transmission efficiency theory;In reality,it is beneficial for investors to make more reasonable investments,and it is also helpful for the policy makers to make more appropriate policies that comply with the laws of the market,and also can promote the rational pricing of the stock market,then promote the healthy development of the two stock markets.Based on the above purpose,this paper will study the co-movement betweenthe mainland and Hongkong stock market under the implementation of Shanghai-Hong Kong Stock Connect program.Firstly,this paper reviewed the relevant literature of the stock market co-movement,found tht most scholars have examined the linkage from rate of return or volatility,not comprehensive and specific,so I determined to analysis the co-movement relationship between mainland and Hongkong stock market from two aspacts:rate of return and volatility.Secondly,made a theoretical analysis of the reasons for the formation of market co-movement from three angles:efficient market theory,behavioral finance theory and market contagion theory;At last,regarded the development of the mainland stock market and Hongkong stock market,Shanghai-Hong Kong Stock Connect as the practical basis,then made a series of internal logic analysis and external performance analysis about the funamental factors that may affect the co-movement,finally reached a hypothesis that there is co-movement between the two markets.Based on the above assumption,firstly this paper selected77 A+H shares’ daily closing pricefrom October 15,2012 to December 17,2016 as raw data,and drew up the stock price index.The follow-up empirical analysis was divided into two parts:I analysized the co-movement relationship between the two areas’ stock returns in the first part,divided the development of A+H shares’ co-movement into two stages,then used the method of econometrics to analysis the long-term equilibrium and short-term linkage of each stage;then in the second part,I used Arch model,univariate and mutivariate Garch model to analysis the volatility of stock index returns in the whole stage.The main conclusions of this paper are as follows:(1)There is co-movement between the two markets’ rate of return in the research interval,and with the implementation of Shanghai-Hong Kong Stock Connect program,the degree of co-movement between Shanghai and Hong Kong has been enhanced;(2)The volatility of stock returns in the two regions has maintained a relatively high and stable linkage,but has no obvious change around the inplementation of Shanghai-Hong Kong Stock Connect program.At last,on the basis of the empirical conclusions,this paper put forward the corresponding suggestions for investors and market regulators.