The Research Of Fluctuation Relationship Between The Stock And Convertible Bond Market In China

The stock market and convertible bond market are important parts of thefinancial market, convertible bond market is playing a positive role to thefinancial market prosperity and the enterprise core competitiveness with thecharacteristics of flexible mode of financing, the low cost of funding, effectivetax avoidance and so on. The study of the relationship between the stockmarket and convertible bond market can enrich wave theory system, offeradvice for investors’ investment decision, further it has reference value to thereform and development of the financial system.This study is to find out whether it has the long fluctuation relationshipbetween the stock market and convertible bond market, and the forms offluctuation relationship. Based on the study, the paper analyzes the influenceof the market impact to another market influence.First, the paper introduces the basic concepts of convertible bond andstock market fluctuations theories, describes the present developmentsituation of the stock market and convertible bond market both at home andabroad, analyzes the causes and mechanism of the fluctuation theoretically.The paper defines the fluctuation relationship between the stock market andconvertible bond market, which is divided into four aspects as market price,volume, liquidity and yield rate.Second, describes the measurement methods of the fluctuations betweenthe stock market and convertible bonds market. Combined with the presentdevelopment situation of the stock market and convertible bonds market, thepaper selects the measurement indices of the fluctuations between the stockmarket and convertible bonds market.Third, analysis of fluctuations in the relationship between the two marketsin the aspects of market price, volume, liquidity and yield rate. In the first place, check out the existence of the long-term equilibrium relationship and set upvector regression model for the variables. Secondly, validate the causalrelationship of the variables in the two markets through setting the bestlag-duration according to the AIC information standards. Then, through theimpulse response function and variance decomposition, examine the Influencedegree between two markets variables.Fourth, through empirical analysis, this paper argues that there is acointegrating relationship between the stock market and convertible bondsmarket. The factors have difference influence to the fluctuation relationship,the stock market guide the convertible bonds market in the aspects of volumeand liquidity; the market influence itself significantly in the aspects of marketprice and yield rate. The impact of the each other between two market effect isdifferent, the stock market shocks influence the convertible bond marketheavily and the influence last longer, while the convertible bonds marketinfluence the stock market impact relatively small.Finally, based on the theoretical analysis and empirical research, thepaper points out the limitations of this study, and outlooks the subsequentresearch in the future.