Study Of Co-movement Under The Background Of Shanghai-Hong Kong Stock Connect

With the deepening of economic integration and financial liberalization,the degree of capital market opening is increasing,the global stock market is becoming more and more closely connected.The official opening of the Shanghai-Hong Kong Stock Connect on November 17,2014,marked the establishment of the exchange mechanism between Shanghai and Hong Kong stock markets,which had a profound impact on the respective price fluctuations and the linkage effect between the two markets.The positive and negative effects of the enhancement of stock price co-movement between stock markets must be comprehensively and objectively analyzed,so as to give full play to the positive role of capital market opening and at the same time to prevent the risks caused by market linkage.Based on the background of Shanghai-Hong Kong Stock Connect,the research on the price fluctuation and linkage effect of two stock markets is conducive to the comprehensive analysis of the operation mechanism of stock markets.This research can improve the understanding and grasp of the functions of capital financing and resource allocation in the stock market,and provide suggestions for investors' decision-making and regulators' policy making.It is also helpful to maintain the stability of stock markets and prevent financial risks,providereference for China to explore the gradual opening strategy in line with its own development and deepen the interconnection of domestic and foreign stock markets.Therefore,this research has important theoretical value and practical significance.This paper adopts literature research method,theoretical analysis method,empirical analysis method and comparative analysis method,selects the logarithmic yield of Shanghai Composite Index and Hang Seng Index from May 9,2005 to December 28,2018 as sample data,and divided the research stage with the implementation of the Shanghai-Hong Kong Stock Connect as the time node.The empirical analysis starts from descriptive statistics and basic test,and adopts VAR model and correlation test,and DCC-GARCH model to build the models of stock index yield sequence,and studies the price fluctuation and linkage effect of Shanghai and Hong Kong stock markets before and after the Shanghai-Hong Kong Stock Connect.Through empirical analysis,the following conclusions are drawn:first,there is a significant positive correlation between Shanghai and Hong Kong stock markets before and after the stock connect,and the positive correlation increased after the stock connect.Second,is VAR model and granger causality test,impulse response and variance decomposition analysis conclusionsare consistent,after the stock connect,the VAR modeling points out that two stock markets have a significant impact on each other,two indexes are each other's granger cause,two markets responds each other with increased impact response and duration,and two stock markets have increased their contribution to each other's volatility.In conclusion,co-movement effect has been enhanced.Third,DCC-GARCH model estimation further verifies the linkage effect of Shanghai and Hong Kong stock markets.The correlation of two stock markets is persistent and time-varying.After the Stock Connect,the correlation of two stock markets increases and the fluctuation degree of the correlation decreases.Based on the longitudinal comparison of the stock price co-movement effect before and after the Shanghai-Hong Kong Stock Connect,this paper discusses the multiple reasons for the enhancement of the stock price linkage effect in Shanghai and Hong Kong stock markets,and its influence on the price level and development trend of the two stock markets.Finally,this paper puts forward relevant policy suggestions from the perspective of promoting the operation experience of Shanghai-Hong Kong Stock Connect,improving the quality of listed companies,improving the structure of market investors,and strengthening institutional construction and supervision.