Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 5 (2017), No. 2, Pages 22-38

DOI: 10.12735/jfe.v5n2p22

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Spillover Effects among the Main Stock Markets in China’s Capital Market Opening Process

Hongyan Liao1  Lianqin Yin1  Shuying Wu2  Chang Yang1 

1Finance Department of International Business School, Jinan University, Zhuhai, China
2School of Translation Studies, Jinan University, Zhuhai, China


To Cite this Article     Article Views: 294     Downloads: 268  Since deposited on 2017-08-07


With the opening and development of China’s capital market, mainland China and the world’s stock market is increasingly close. This paper explores the volatility spillover effect between China’s stock market and the world’s major ones to study the transmission path of stock market risk and provides policy suggestions for promoting development of China’s stock market. We selected daily returns of four large indices from December 26, 1996 to March 1, 2016 as the main object to study and analyze Shanghai Composite Index, Hong Kong Hang Seng Index, American Dow Jones Index, and British Financial Times Index. According to the different degree of openness of China’s capital market, the samples are divided into five sub-stages. Granger test and DCC-MGARCH model are used to analyze the causal relationship and dynamic correlation of the mainland stock market and the major ones in the world. To avoid the volatility and risks, we found corresponding measures. The empirical results show that the implementation of WTO and the QFII system cannot effectively promote the internationalization of the stock market in China. However, the exchange rate reform of RMB and Shanghai-Hong Kong Stock Connect Program have greatly improved the linkage between Chinese and international stock markets.

JEL Classifications: G15, F30, D00

Keywords: Fluctuation spillover effect; Dynamic correlation; Granger test; DCC-MGARCH model

To Cite this Article: Liao, H., Yin, L., Wu, S., & Yang, C. (2017). Spillover effects among the main stock markets in China’s capital market opening process. Journal of Finance and Economics, 5(2), 22-38.

Copyright © Hongyan Liao et al.

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This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Spillover Effects among the Main Stock Markets in China’s Capital Market Opening Process