Research On Linkage Change Of Chinese And American Stock Markets Based On GARCH-copula Model

In the past decade,the stock market in mainland China has made significant progress,and the scale of the stock market in mainland China has been rapidly expanding.The improvement of relevant laws and regulations have gradually solved a series of problems.At the same time,With the deepening of the influence of globalization,the linkage between China and the world's major stock markets has increasingly attracted people's attention.China and other countries in the world,especially the United States,have much closer economic ties and enjoy a frequent commitment.The degree of the connection between capital markets is further enhanced with the aggravation of capital flows of the two countries.Based on the size of the American economy and the degree of development of its capital market,American capital market has a more direct impact on China's economic and financial fluctuations.We need to pay a closer attention to the new characteristics and changes in the capital market linkage between the two countries.It is in these decades,China's stock market has been transformed into a limited open market from a rather closed market;this is a liberalization process,in which China's stock market is gradually integrating into the world capital market.This transformation,on one hand,allows investors to use the world capital market to enrich their investment portfolio,to disperse investment risks and to improve investment returns;On the other hand,Chinese stock market managers are required to formulate corresponding policies to ensure the healthy development of Chinese stock market.The domestic economic situation,the degree of opening to the outside world,the national history and culture,the social conditions,the political system,and other reasons among countries lead to the different levels of linkage.Most recent phenomenon,namely the Donald Trump's administration and its adverse and raging trade policy are also likely to contribute the joint movement of two financial market.A couple of tweets,which brag about his new tariff move on China or any other major nations in a most straightforward manner,lead to stock market plummet and stock market starts to reclaim the lost territory when a rather friendly information is released.An instant social platform message like his tweet aggregates the effect of trade policy itself.In this paper,a comprehensive comparative analysis between two stock markets will be conducted after a discussion of the mechanisms of stock market linkage is talked in the first.GARCH-copula model is used to describe the multivariate distribution of the two most representative stock indexes in China and the United States,and it is found that the correlation between the two stock markets in China and the United States has been increasing dramatically in the past ten years.Such an increasing linkage reflects the enhancement of China's economic strength and the opening up of financial markets as well as the new economic structure of the world.At the same time,relevant regulators should strengthen the supervision of the international flows of financial assets,pay closer attention to fluctuations in the world's financial markets,especially in the US market,and prevent the negative impact on China's financial stability.