A Study On The Volatility Spillover Between Securities Markets Based On Time-varying Copula Models

Accompanied by the proceedings of financial liberalization and globalization, the volatilities of one securities market are more easily transimited to another securities market.The global financial tsunami triggered by the United States subprime mortgage crisis has already been transmitted to the world’s financial markets, resulting in global financial shocks, which leads to tremendous external shocks on the stable development of mainland China’s securities market, thus mainland China’s securities market is now facing great challenges.Therefore, it’s crucial to study the volatility spillover between mainland China’s securities market and the international securities markets.Volatilities in different securities markets demonstrate the characteristcs of time-varying, non-symmetrical as well as non-linear related, especially under some extrem circumstances, there are always some kinds of tail correlations among different securities markets.By applying the Copula model into the study of spillover among different securities markets, not only can we better capture the dynamic time-varying relationship among different securities markets, but also can we better describe the tail correlations among different securities markets.Firstly, a comprehensive review of volatility research methods in securities markets is conducted in this paper; Secondly, the factors that influence securities markets volatility are discussed as well as the characteristics of securities markets volatility, after this, the formation mechanism of securities markets volatility spillover is explored. Finally, an empirical analysis is conducted on the volatility spillover between different securities markets respectively for the period of fiancial safty and financial cirsis.The empirical results show there is volatility spillover from the U.S. securities market to mainland China’s securities market, as well as volatility spillover from China’s mainland securities market to Hong Kong securities market, at the same time, this volatility spillover is greatly strengthened during the financial cirsis period.