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This paper constitutes the first exercise to apply linear and non-linear Granger causality tests to investigate the time-varying spillover effect between the mainland China and other global stock markets. The analysis is conducted in a comparative way by using both the Granger (1969)'s Granger causality test and the Hiemstra and Jones (1994)'s nonlinear Granger causality test. The empirical results reveal that there exists nonlinear spillover between mainland China and other global main stock markets. With the deepening of globalization and development in China's stock market, there is evidence of an increasing integration among domestic and international stock markets. Policy implication of this paper is that risk monitor system should attach great importance to the information flow from overseas stock markets. [ABSTRACT FROM AUTHOR]

Basing on the theoretical model and empirical analysis, this paper provides a discussion of the hedging effectiveness between the stock market and index future market under the imperfect market conditions. In theoretical analysis, the relation of market imperfection with market microstructure noise and hedging effectiveness is established. In empirical analysis, one approach based on nonparametric estimation is established and applied to real data. The reasonableness of model assumptions and the correction of model conclusions are verified by using 5-minute frequency intra data. Both theoretical and empirical analyses show that the higher the degree of market imperfection, the more necessary to consider the impact of market microstructure noise when using stock index futures to hedge the stock market risk. The empirical results also show that there exists a high degree of imperfection between stock market and stock index future market, but the degree of imperfection has a decreasing trend. [ABSTRACT FROM AUTHOR]