Research On Mean Spillover Effects And Relationships Of Volatility Among Chinese Asset Markets

The relationships among asset makets have long been unresolved issues ineconomic and financial literatures. By using VAR models or multifactor models withGARCH process, this paper investigates the mean spillover effects and dynamicrelationships of volatility among Chinese asset markets. Moreover, the policyimplications of the findings are all provided. The main distinctive research work andconclusions are as follows：Firstly，by adopting GARCH model to study time-varying relationships of returnsamong stocks, bonds and gold in order to investigate the existence of flights and marketcontagion during the period of financial crisis in2008. It is shown that there only existsmarket contagion between the stock market and the gold market, and have no evidenceto identify the correlation of the two markets in stock crisis periods. In addition, theempirical results also reveal that China’s bond market is a safe haven in extreme stockmarket collapse.Secondly，by using a multifactor GARCH model and adopting the weekly datafrom October2006to July2010,the main purpose is to identify the risk factors of28industry sector indexes in Chinese stock market,such as market return,interest rate termpremium,foreign exchange rate risk,and oil and coal price returns.Empirical analysisprovides five key results in the determination of the stock returns. The exchange ratechange has a remarkable negative impact on sectors of steel＆iron, coal＆oil,andcommercial chain industry. Meanwhile, the interest rate term premium shows positiveeffects on capital intensive manufacturing industries, and oil price returns can onlyinfluence stock returns of electric appliance sector, medicine sector and Leisure＆hotelsector. Moreover, there exist significiantly negative relationships which coal returnsexert to the public utilities industriy and architecture industry. Surprisingly, we find thatboth oil price returns and coal price returns are all not the risk factors of coal＆oilsector.Thirdly，by constructing the VAR-DCC-MVGARCH model with two variables, therelationships and hedging strategies between spot and futures returns have been studiedfrom2008to2011in Chinese gold markets. We find that there only exists unidirectionimpaction from spot to futures returns, and the volatilities of returns exhibit not onlytime-varying features but also highly positive correlation. To a certain extent, our model is shown to produce more efficient hedging strategies.Finally，by constructing the VAR-DCC-MVGARCH model with five variables andadopting the weekly data from July2005to March2011,we test mean spillover effectsand dynamic conditional correlations among oil, gold, interest rate, exchange rate andstock markets in China. Our findings are as follows.There are uni-directional relationsof mean spillover effect from interest rate to exchange rate,oil to exchange rate,gold tointerest rate and gold to oil,while the mean spillover effect between gold and stockmarkets is bi-directional.Additionally,the correlations of volatility are time-varying inall the cases,and there exist significiantly negative relationships between stock andinterest rate,exchange rate and interest rate,oil and exchange rate,and gold and exchangerate.Meantime,the positive correlations are founded between stock and oil,stock andgold,interest rate and gold,and oil and gold. Last but not least, we compare the resultswith the existing literature.Due to some new ideas and new perspectives about the relationships among assetmakets, this work will enrich the Portfolio Theory and Energy Economy. Simutaneously,the research has useful information for supervisors to make the effective macropoliciesand for investors to formulate portfolio and control risk.