Comparative Analysis On The Tail Correlation Of Stock-Bond-Gold Markets Between Chinese And American

With financial innovation and the rapid progress of information technology, the globalization and integration of financial markets get rapid development. And the structure of the global financial market fundamentally changes. A deepened mutual reliance and influence has occurred in the global financial markets. The circulation of risk capital in a world wild scale makes the resources allocation more efficient and effective. However, the joined movement between stock market returns makes the volatility in one market transfer to the other one more easily and rapid. Modeling the dependency between stock market return is worth to do now. Since the reform and opening-up policy, China’s financial market gets a rapid development, and the category of the financial market is more and more rich and diverse. It’s very necessary to analyze the characteristics of the dependency structure between among the financial markets.In order to avoid the limits of classical analysis methods, we refer to the existing research results and introduce Copula theory. I apply it to the measure the dependence among stock market、bond market and gold market. Taking the great advantage of Copula, we can capture the tail dependence between financial markets. This paper mainly capture the tail dependence among the daily returns of stock market、bond market and gold market. At the same time, we contrast analysis of the empirical research results of financial market in China and the United States.This article firstly researches the dependence among the stock market, bond market and gold market both at home and abroad, and briefly introduces the application of Copulas. The second part expounds the related theory of Copulas function. The third part is the empirical part which is the most important in this paper. In this part, firstly based on analyze the daily return rate of relevant indicators of the three major financial markets, we apply GARCH-t to construct simulation. Secondly, we use knowledge of Copula theory and receive the financial market in China and the United States analysis results of Copula connect function. Thirdly, we make comparison and analysis of the empirical research results between financial markets in China and the United States. Lastly, we put forward some proposals according to the results of empirical research.The empirical results show us the followings. Firstly, it’s suitable to use ARMA-GARCH (1,1)-t model to fit these return series. Secondly, there exists tail dependence among the stock market, bond market and gold market, but the correlation levels differ clearly, besides, between stocks and bonds is sensitive to the low tail correlation, so as well with between stocks and gold, between bonds and gold is sensitive to the up tail correlation.Thirdly, the empirical results reflect the important differences in the two different markets of China and the United States. On the one hand, the correlation of China’s financial markets is weaker than the U.S. On the other hand, the correlation order in various markets is different, in U.S. financial markets, the tail correlation between stocks and bonds is strongest, followed by bonds and gold, the bottom for stocks and gold; in the Chinese market is characterized by the strongest between bonds and gold, followed by stocks and gold, finally to stocks and bonds. The paper results suggest that China needs to continue to promote the interest rate liberalization, perfect the financial product and strengthen the construction of financial market system. In order to narrow the gap with the mature financial markets gradually. Well the investors should scientific invest in different financial markets according to the specific characteristics of the correlation of our country’s financial markets and avoid the investment risk effectively.