Return and Volatility Spillovers among Sector Indexes in Shanghai-Shenzhen-Hong Kong Stock Markets: Evidence from the Time and Frequency Domains

The opening of Shanghai-Hong Kong Stock Connect (SH-HK) Program and Shenzhen-Hong Kong Stock Connect (SZ-HK) Program has changed the relationship between stock markets, and caused more challenges to the risk management and asset portfolio. Therefore, this paper applies the DY and BK methods to analyze the static and dynamic spillovers of Shanghai, Shenzhen and Hong Kong stock markets from the time and frequency perspectives. Based on 29 sector indexes from three markets ranging from June 15, 2011 to December 31, 2020, three conclusions are obtained. The implementation of the SH-HK Program and the SZ-HK Program has enhanced the spillover effects of return and volatility among Chinese Mainland stock markets and Hong Kong stock market. The Shanghai Energy, the Shanghai Material and the Shanghai Industrial are always obvious net senders of spillover, while the Hang Seng telecommunications, the Hang Seng real estate construction industry and the Hang Seng public utilities are always net receivers. The spillover mainly occurs in the short term. These results would be beneficial to risk supervision and portfolio optimization.