An Analysis Of The Linkage Between The Shanghai And Hong Kong Stock Markets And Their Macro-influencing Factors

Due to the close ties between countries and regions,the stock markets often show the same trend of rising or falling,which is called the linkage between stock markets.Linkage exists widespread in the global stock markets,and has been closely focused by more and more scholars and investors.Studying this issue will help investors avoid the impact of external stock market volatility.In addition,it is beneficial for regulators to get early detection and react to possible crises,so that they can ensure the healthy development of the stock markets.This paper applies GARCH?Copula and VAR models to empirically study the linkage between Chinese domestic stock market and Hong Kong stock market and its influencing factors.By measuring the dynamic correlation of stock market returns,we can see the change of linkage between the markets in the past two decades.Based on the research of dynamic linkage structure,explore the macroeconomic factors that affect the linkage of returns between Shanghai and Hong Kong stock markets.This paper gradually clarifies the context of linkage theory system between stock markets from these three aspects: the linkage mechanism of the real economy,the linkage between macro economy and stock market,and the internal mechanism of stock market linkage.Based on relevant theoretical research,this paper uses the Shanghai Composite Index and the Hong Kong Hang Seng Index to represent the Chinese mainland stock market and the Hong Kong stock market respectively.The daily closing prices of the two indices from January 2,1997 to September 3,2018 are taken as sample data.An empirical study on the linkage between the Chinese mainland stock market and the Hong Kong stock market including three steps: First,in order to examine the linkage between the Chinese mainland stock market and the Hong Kong stock market,this paper establishes a GARCH(1,1)model to simulate the edge distribution of logarithmic daily return rates of the two stock markets.Secondly,based on the edge distribution,this paper uses the Copula function to quantitatively analyze the dynamic time-varying linkage between the two stock markets.Third,combined with the previous two steps of quantitative analysis of the stock market linkage,this paper uses the calculated dynamic condition correlation coefficient to measure the linkage between the Chinese mainland stock market and the Hong Kong stock market,the exchange rate,the difference in inflation rate,the difference in GDP growth rate and the degree of openness as macro-influence factors,then establish VAR model to analyze the macroeconomic factors that affects the linkage of the stock markets.The results of empirical research show that: the time-varying linkage between Shanghai and Hong Kong stock markets has gradually increased over the past 20 years.The static correlation coefficient is 0.33 and the yield series is positively correlated,but the degree of correlation is weak.Further,through the analysis of the macro-influence factors of the stock market linkage,the exchange rate,the degree of openness and the difference in GDP growth rate have no significant impact on the linkage between the Chinese mainland stock market and the Hong Kong stock market,but the difference in inflation rate has a significant impact on stock market linkages.