A Study on the Co-movement of Stock Markets between China and the US in Long and Short Term

Abstract

The global integration of economics and finance has strengthened the economic ties among all countries, and the cross-border capital flows have become more frequent, magnifying the mutual influence among the global stock markets. After 30 years of development in capital market, China has opened up its stock market, significantly enhancing its connection with the world. This paper explores whether the long-term and short-term relationship of stock markets between China and the US has changed, with the implementation of China s opening-up measures. The results prove that there was no long-term co-movement of stock markets between China and the US before 2014, and the volatility spillover effect was one-way from the US to China. However, after the implementation of the opening-up measures of China, the long-term relationship began to show and the volatility spillover effect became two-way.