A study on the co‐movement and influencing factors of stock markets between China and the other G20 members

Sen Wang and Zhixiu Guo

International Journal of Finance & Economics, 2020, vol. 25, issue 1, 43-62

Abstract: China A‐shares was formally included in the MSCI Emerging Market Index in June 2018, which indicates that China has taken an important step in the internationalization of the capital market. As the world's second largest economy, stock market co‐movement between China and other of G20 members have become an important part of the world's economic analysis. This paper selects the representative stock index returns rate of G20 members; uses the DCC‐MGARCH model to study the stock market volatility co‐movement of China and other G20 members between January 1, 2015, and March 31, 2018; and uses the two‐way fixed effects model to study on the influencing factors of stock market co‐movement mechanism including economic linkages between China and other G20 members, various aspects of China's domestic fundamentals, and stock market development. It shows that the performance and influencing factors of co‐movement between China and other G20 members are time‐varying. Combined with empirical results, this paper also makes recommendations from the perspectives of investors, policy makers, stock market reform, and macroeconomic transformation.

Date: 2020
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