Comparison Research Of Euramerican Sovereign Credit Rating Downgrades Shocks On Chinese Bond And Stock Market

With the advancement of the economic globalization and financial liberalization, the world economy obtained the full development. Meanwhile, a variety of adverse factors which lead to financial crisis seriously affect the economy and financial markets. In recent years, sovereign credit rating downgrades make a large volatility of international debt and stock market, affect the stable development of various economies. The world’s three major rating agencies frequently downgraded the sovereign credit rating of the Eurozone countries and America result in that their bond yields repeatedly hit a rare record level, meanwhile leading to the recession of the global stock market, seriously affect the normal development of financial markets. Therefore, comparing Euramerican sovereign credit rating downgrades shock on Chinese bond and stock market and studying the cross-market effects have important practical significance.Since the European and American debt crisis, sovereign credit ratings and the impact effect have gained wide attention of scholars both at home and abroad, and have also made some good results. But the difference between different financial markets and the dynamic process have not been fully studied. In fact, as the most important financial market in China, bond market and stock market, because of the difference of its own characteristics, they also should have different performance in the face of the sovereign credit risk. Therefore, in this paper, in combination with the reality background of the Europe and the United States sovereign credit rating downgrade, the author uses the Econometric analysis method, constructs econometric analysis model, does empirical researches on the different impact between the bond market and stock market in our country when they suffer credit ratings’ shock, and tests the cross-market effects under the sovereign credit rating shock.First of all, this paper uses cointegration and error correction model, with the financial markets comovement, the economic fundamental hypothesis and the market contagion hypothesis, empirically compares the impact of the sovereign credit rating on the bond market and stock market. The empirical results show that the change of European and American sovereign credit ratings will have impact on Chinese stock market and bond market. Rating events’ impacts on Chinese bond market and stock market have different manifestations. In addition, in the way of the number of sovereign states, the sovereign credit rating has more impact on the bond market of our country, and the influence direction on the bond market and the stock market is opposite.Secondly, this paper uses event study method, empirically compare the dynamic impact process of the sovereign credit rating shocking to the bond market and stock market. Studies have found that the sovereign credit rating has no negative impact on the bond market and stock market in the early days of the downgrade. After a period of time, the same rating event will cause contrary impact on the bond market and stock market. The impact of Europe and the United States sovereign credit ratings show a trend of gradually decreasing over time, but the Chinese stock market reaction to the ratings are lagged.Finally, this paper builds SUR model(Seemingly Unrelated Regressions Model)and adds the order flow variable to capture the flow of funds, tests the cross-market effects on the basis of studying of the former two parts. The study finds that Europe and the United States sovereign credit rating downgrades will cause the cross-market effects between the bond market and stock market in our country, in order to avoid sovereign credit risk, investors will transfer funds between the bond market and stock market.