Research On The Co-movement Of China's Shanghai And Hong Kong Stock Markets

In this era of economic and financial development,and global integration,finance has become one of the most important industries in a country.The highly developed financial market not only represents a country's strong economic strength,but also an important force that affects the trend of the global capital market.Having the developed fiancial market,not only can help the country to attract more foreign capital,promote the domestic economic development,but also can improve the financial discourse,the pricing power of the country's economy improve their position in the global market,grasp the initiative in economic and trade activities.Because the time of the development of China's socialist market economic system is not long,now the mainland financial market mechanism,laws,and regulations is not perfect,market environment and other issues behind,at the same time,the mainland market is relatively closed investment environment is not conducive to foreign capital inflows and outflows,which makes the domestic financial market status of the world ranking seriously disproportionate.In recent years,China has been promoting financial internationalization,including specific measures to promote the establishment of Asian investment bank,the RMB in the SDR,promote the development of a new era of.The Belt and Road",to strengthen financial cooperation with other countries.Hong Kong as the capitalist market,is very closely with the external market environment,at the same time,as the China Special Administrative Region,and the economic and trade ties and the two policies have consistency,convergence,so Hong Kong became the first station,field trials of mainland financial market opening.The opening of Shanghai-Hong Kong Stock Connect in November 2014,the opening of Shenzhen-Hong.Kong Stock Connect in December 2016,the interoperability of these capital markets is our effort to realize the internationalization of financial market.This paper is mainly about the linkage trend and current situation of Shanghai stock market and Hong Kong stock market.Taking Shanghai Composite Index as the representative of Shanghai stock market,Hang Seng index represents Hong Kong market,and the closing price of two indices from 2012 to 2017 is taken as sample data.At the same time,according to the opening time of Shanghai-Hong Kong Stock Connect and MSCI shares index,sample data will be divided into three stages,were compared and analyzed the linkage effect of three stages of Shanghai and Hong Kong stock market.After the qualitative analysis on the Shanghai and Hong Kong stock market linkage,we.will start the quantitative analysis of the three stages of the sample data:the first step is the ADF unit root test on the three stage of the data,determining that the logarithmic sequence of three stages of sample data is a single whole time series.The second step is the Johansen cointegration test between Shanghai and Hong Kong stock market,to explore whether there is a long-term equilibrium relationship,the results show that in the first stage there are two cointegration relationship in 5%confidence level,there is a significant long-term equilibrium relationship;second stage results show that there is only one cointegration relationship,the linkage is weakened;there are two corelationships between the third stages showing obvious linkage effects.The third step is to conduct Grainger causality test and analyze the relationship between the two markets.It finds that the first phase of the Shanghai composite index is the Grainger reason of Hang Seng Index.The two or three stage is the Hang Seng Index,which has a good explanation for the future change of Shanghai Composite Index.The dynamic correlation coefficient by stock index log return series to establish the DCC-GARCH model to obtain the Shanghai Composite Index and the Hang Seng index at the end of fourth,observed that the higher correlation coefficient of the first stage,the second stage of early late correlation coefficient is higher,decreased significantly,the correlation coefficient is third stage trend suddenly rise,the correlation was significantly enhanced.In the background of Shanghai-London Stock Connect promoting further interoperability,the results of this study have a certain reference to the government market decision.