Research On The Volatility Spillover Effect Between The Chinese And American Stock Markets

With the continuous advancement of economic globalization and financial liberalization,the links between international financial markets have also been closer,and there has been a change in the trend of synergistic volatility among the stock markets of the major economies in the world.In the past,the study of the volatility spillover effect among stock markets was more concentrated the major developed stock markets,while there was little research on stock market volatility in emerging countries.With the continuous development of emerging countries,the links with international financial markets have become more and more close,which plays an important role in global economic development and financial development.Therefore,the volatility change between stock market and international stock market in emerging countries is also paid more and more attention by many scholars.The United States is the most developed economy in the word,has a huge impact on global stock markets.while China is the largest emerging market,and China's stock market is increasingly influential in international stock markets.By studying the volatility spillover effect between Chinese and American stock markets,we can understand whether there is the volatility spillover effect between the two stock markets and understand the direction and characteristics of the volatility spillover,and provide corresponding countermeasures and suggestions for the Chinese stock market to resist the impact of the foreign stock market in the future,so that China's stock market can prevent and avoid foreign risks as far as possible and be stably developing.This paper first sort out related literatures of the volatility spillover effect both the domestic and foreign stock markets,then expounds the related concepts and theories of the volatility spillover effect between the stock markets,then analyzes the present situation and characteristics of the volatility spillover between the Chinese and American stock markets,and puts forward the empirical research hypothesis of this paper.This paper selects the opening price and closing price of the Shanghai Composite Index and the Dow Jones index from 2000 to 2018 to study the volatility spillover effect of the whole stock markets in China and United States;And selects the opening price and closing price of the CSI 300 index and the S & P 500 index from 2005 to 2018 in order to analyze the volatility spillover effects of Bulk trading market;Select the opening price and closing price of the Gem Composite Index and the Nasdaq index from 2010 to 2018 to examine the volatility spillover effects of the innovative markets in China and the United States.The empirical evidence of this paper is divided into two parts,one is to use GARCH-DCC model to carry on the empirical analysis to three groups of indices,to study the dynamic correlation between stock markets of China and United States,and to investigate the existence of the volatility spillover effect between stock markets.Second,the GARCH-BEKK model is used to further investigate the volatility spillover effect between the opening yield and the closing yield of each group of stock indexes of China and the United States,and to explore the volatility spillover effect between the opening yield and the closing yield of the two stock markets.Through the empirical analysis,the conclusions of this paper are as follows:(1)There are significant dynamic correlation and bidirectional volatility spillover effect in stock markets of China and United States.And the volatility of the US stock market to China's stock markets is significantly greater than the volatility of the Chinese stock market to the US stock market volatility spillover.(2)The dynamic correlation is different between stock markets of China and the United States in different periods.The correlation and volatility spillover effects are more pronounced during major events in China and the United States.(3)The fluctuation spillover effect between large and medium-sized enterprises trading market is weaker than that of innovative market of China and America.The reason may be that the quality of the companies listed in the gem securities market is not as high as the large and medium-sized enterprises,or the innovative market is mainly based on high-tech industry companies,high-tech industry companies themselves are more risk than companies in other industries,and thus the possibility of stock market volatility is even greater.(4)Between China and the United States stock markets,the volatility spillover effect of the closing yield to the opening yield higher than the opening yield to the closing yield.The reason may be investors are more inclined to focus on closing prices,ignoring the information implied in the opening prices.According to the conclusion of the study,this paper puts forward four countermeasures and suggestions.First,optimizing the structure of investors and improving the quality of investors.We should vigorously develop all kinds of investment institutions and improve the quality of investors to avoid more speculative behavior.Second,improve the information disclosure system for listed companies,and improve the transparency of information.Regulators need to guide the healthy development of listed companies,promote the rational allocation of stock market resources,continue to further promote capital marketization reform,and develop multi-level capital markets.Then,deepen the reform of interest rate marketization,improve the reform of exchange rate system,develop multi-level and various types of financial products,prevent financial risk gathering.Finally,establish the early warning and emergency mechanism of stock market,management should choose the appropriate adjustment mode according to the changing state of stock market.