Research on Interaction Between Chinese and American Stock Index: A VAR Approach

Abstract

Today's world is a changing world and Economic globalization will be an irresistible trend. There are so many uncertain event factors like the global covid-19 epidemic, global ChinaUnited States trade war and Brexit etc. Those events are all affecting the global economic growth. However, will the affection be one-way or two-way? This paper focus on investigating the interaction between China and Americans Stock Index. In this study, the stock index Standard and Poor's 500 (S&P 500) in America and China Securities Index 300 (CSI 300) in China from 01/09/2021 to 01/09/2022 are selected as data, and the VAR model is established to capture the relationship between Chinas and Americas stock variation. The following conclusions can be drawn from a study of the results: first, VAR model is convergent as the period of the time increases. Second, the impact of the Impulse response will last for about 10-14 periods. Third, from the variance decomposition, the affection from CSI 300 to S&P 500 will stabilised at around 10.993% and from S&P 500 to CSI 300 will stabilised at around 2.77%. The results in this paper benefit the related investors in financial markets.