With the Shanghai-Hong Kong Stock Connect program: A research on the volatility spillover effect of Shanghai and Hong Kong stock market

The opening of Shanghai-Hong Kong Stock Connect program established connecting mechanism between the capital of Shanghai and Hong Kong, which has an impact on the volatility spillover effect of Shanghai and Hong Kong stock market. The article analyzes empirically the volatility spillover effect changing of the common trade time stock price index before staring the Shanghai-Hong Kong Stock Connect program. It divides days from November 16, 2013 to August 31, 2016 to four stages. And then it makes BEEK-GARCH analysation according to the daily data of the Hang Seng Index and the Shanghai Composite Index. The results showed that it enhanced the volatility spillover effect between Shanghai and Hong Kong stock market after beginning the Shanghai-Hong Kong Stock Connect program. With the degree of internationalization of the Mainland stock market increasing, the impact from International capital market on stock market is increasing. Meanwhile, possibilities of the risk of infection between markets will rise. Consequently, to response test of the international capital and the impact of exchange rate fluctuations and other factors, we need to further establish and improve financial market regulation mechanism.