Comparative Research on Capital Allocation Efficiency of Stock Market Between China and UK

The British stock market is the most internationalized stock market in the world, and its capital allocation function is excellent. There are many references for China to draw lessons from it. With the development of “Shanghai-London stock connection”, China and the UK are getting closer and closer to the two major economies in the world. On the basis of the Jeffrey Wurgler (2000) capital allocation efficiency model, this study selects the financing amount and GDP data of the Chinese and English stock markets in the past 2000-2016. And the Granger causality test and the VAR model are used to compare the relationship between the financing amount and the economic growth of the Chinese and English stock markets. The study finds that there is a long-term equilibrium relationship between GDP and stock market funding in both countries. And the capital allocation efficiency of the UK stock market is higher than that of the Chinese stock market. Introduction The stock market is an important part of the financial market. It can not only raise funds for the development of listed companies, but also can be used as an investment method to enrich the investment channels of investors. On April 10, 2014, the 7th China-UK Economic and Financial Policy Report released a report, the two countries will focus on researching the interconnection between the Shanghai Stock Exchange and the London Stock Exchange and focus on promoting the opening of the “Shanghai-London Stock Connection”. This opens up a higher level of opening up to the Chinese stock market. This is also the third inter-regional exchange policy after the successful opening of “Shanghai-Hong Kong Stock Connection” and “Shenzhen-Hong Kong Stock Connection”, which is of great significance to the development of China's stock market. This article takes the stock market and national economy of the two countries as the research object, studies the efficiency of capital allocation in the stock markets of the two countries, and compares the efficiency of the two countries through empirical analysis, so as to find the gap, and proposes corresponding suggestions for the development of China’s stock market. Review of Literature Foreign scholars have studied the efficiency of capital allocation in the stock market from the perspective of companies and countries. Peter Blair Henry and Chari (2014) selected 369 companies as research subjects and conducted a comparative study of their total share capital before and after the opening of the stock market. As a result, after the stock market opened, the company’s total equity increased by 4.1% compared to the pre-opening period. Morch Randall, Kan Li, Fan Yang and Yung Bernard (2013) pointed out through research that different countries' stock market price has different ability to reflect value, and the validity of the transmitted information is also different. Elfreda Nga-Yee Wong, Terence Tai-Leung Chong, and Sam Ho-Sum Cheng (2016) Comparative study of the capital allocation efficiency of China, India, Russia, Brazil BRIC stock markets, The empirical analysis shows that among the four BRICS countries, Brazil has the highest capital allocation efficiency in the stock market. Domestic scholars started late in the research on the efficiency of capital allocation in the stock market. Fang Yan (2012) also conducts research on two levels, but she chooses both macro and