Abstract

The maturity and openness of Chinese stock markets can be measured by price impact of other mature stock markets on them. The article uses wavelet analysis to eliminate noise in stock price signal and  analyzes to what degree Shanghai stock market is affected by volatility of stock markets of Hong Kong, Tokyo, New York and London by using Structural Vector Auto Regression (SVAR), impulse response analysis and variance decomposition. The results show that Chinese stock markets are becoming more and more mature and open, which are integrated into the global stock market gradually, which can be known from the response of Shanghai Composite Index, shocked by the other indices. Among all the mature stock indices in the paper, influence of Dow Jones Industrial Average on Shanghai Composite Index is most significant, followed by FTSE100 Index.

Key words: Chinese stock markets, wavelet analysis, Structural Vector Auto Regression (SVAR), impulse response, variance decomposition.