Analysis Of The Impact Of The Inclusion Of A-Shares Into The MSCI Index On Stock Price Fluctuation

In recent years,China's A-share market has been opening up,among which the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect have become the symbol events of opening up.After three years of continuous breakthroughs,A-shares were officially included in the MSCI emerging markets index in June 2018,indicating that A-shares are finally recognized by global investors.This event will bring more incremental capital and more professional institutional investors to the A-share market.Due to the differences in stock markets of different countries,the volatility of stock markets in different countries will have different changes after the opening of the capital market.Therefore,we need to make a specific analysis of the impact of the event according to the actual situation.This paper aims to study whether the stock price fluctuation of the underlying stock changes after the a-share is included in the MSCI index.Before the formal study,this paper first used the GARCH model to measure the volatility of the underlying stocks.The daily data of the overall return rate of the underlying stocks were obtained by weighting the return rate of the underlying stocks into the MSCI index by market value,and the volatility was measured by the GARCH model.It is found that the volatility of the underlying stocks tends to increase over time,which is consistent with the SSE composite index volatility.Through comparison,the volatility of the underlying stocks is more than that of the SSE composite index for most of the time.The volatility of index is larger than that of the SSE composite index,and after inclusion,the volatility difference is relatively small.To study the fluctuation of stock price,indicated by monthly share price Amplitude,this paper mainly uses the double difference method or multiple difference method.In terms of the setting of the experimental group and control group,this paper uses the propensity matching method to obtain two groups of data,which has passed the randomness and homogeneity test and can be analyzed by the double difference method.The study found that after the official inclusion of stock index,the fluctuation of stock price was reduced,indicating that this event had the effect of restraining the fluctuation of stock price.The announcement of the inclusion of the stock index brought short-term changes in stock prices,but had no impact on the fluctuations of stock prices.The study studied the impact of events on the rise and fall of stock prices in different industries,and the formal inclusion would not have a significant impact on the long-term rise and fall of stock prices.Inclusion in the MSCI index has an impact on stock prices,and studies suggest foreign capital plays a role.The share price rises and falls brought on by the announcement of the inclusion were short-lived.From the perspective of the results of the inclusion,the inclusion boosted market confidence and short-term capital inflow had a positive effect on the rise of stock prices.Positive effect after the stock price will produce a certain decline.After the formal inclusion,the stock price fluctuation has a certain degree of reduction.Foreign ownership of a-shares has been rising,increasing by 50-60% from the official date to February 2019.Compared with the huge size of a-shares,the average holding ratio is less than 3%,which determines that foreign capital is only auxiliary rather than dominant in the a-share market.According to the research,this paper believes that it is necessary to open the stock market,which will attract the inflow of foreign capital in the short term and have the effect of restraining the stock market volatility,which has no adverse impact on the healthy development of the stock market.