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Asymmetric Spillover Effects Between Shanghai-Hong Kong Stock Connect Capital Flows and Stock Market Volatility: A Dynamic Analysis Based on Investor Sentiment

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  • Chen Zhu

Abstract

We employ the SV-TVP-SVAR model to explore the asymmetric spillover effects between Shanghai-Hong Kong Stock Connect capital flows and stock market volatility, as well as the role of investor sentiment. Our findings reveal significant asymmetric spillover effects between Shanghai-Hong Kong Stock Connect capital flows and mainland China stock market volatility, with mainland investors’ sentiment playing a moderating role. Additionally, the first legal case of cross-border manipulation of the Shanghai-Hong Kong Stock Connect has caused mainland investors to distrust the mechanism, subsequently leading to a decline in the mainland stock market index. The increase in the daily limit of Shanghai-Hong Kong Stock Connect has not alleviated mainland investors’ concerns about cross-border capital flow risks, but instead, has led to a negative impulse response of the mainland stock market index to the net capital inflows through Shanghai-Hong Kong Stock Connect. JEL Classification: G15, F32, G14.

Suggested Citation

  • Chen Zhu, 2025. "Asymmetric Spillover Effects Between Shanghai-Hong Kong Stock Connect Capital Flows and Stock Market Volatility: A Dynamic Analysis Based on Investor Sentiment," SAGE Open, , vol. 15(3), pages 21582440251, August.
    • Handle: RePEc:sae:sagope:v:15:y:2025:i:3:p:21582440251365481
    DOI: 10.1177/21582440251365481
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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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