The Influence of Shanghai (Shenzhen)-Hongkong Stock Connect Program on the Dynamic Correlation between those Markets - An Empirical Analysis Based on DCC-VaR-MVGARCH Model

摘要

This paper empirically analyzes the effect of Shanghai (Shenzhen)-Hongkong stock connect program on the dynamic correlation between those three markets based on the DCC-VaR-MVGARCH model. The results obtained show that: The volatility of Shanghai, Shenzhen and Hongkong stock markets has leverage effect. The opening of the Stock Connect Program between Shanghai and Hong Kong has improved the dynamic correlation coefficient between Shanghai and Hong Kong stock markets, reduced the dynamic correlation coefficient between Shenzhen and Hong Kong stock markets, and lowered the dynamic correlation coefficient between Shanghai and Shenzhen stock markets. The opening of Shenzhen-Hongkong Stock Connect Program has improved the dynamic correlation coefficient between Shenzhen and Hong Kong stock markets, decreased the dynamic correlation coefficient between Shanghai and Hong Kong stock markets, and lessened the dynamic correlation coefficient between Shanghai and Shenzhen stock markets. However, due to the leverage effect, the dynamic correlation between Shanghai and Hong Kong stock markets has gained some increments after the opening of Shenzhen-Hongkong Stock Connect Program. The program code of the model is invented by the author.