Reserach On Return Linkage Based On Stock Market And Bond Market

With the rapid development of economy, after several years, China’s capital market system has taken shape. The stock market and bond market has become the most important financing way, while stock and bond also become main investment products. But due to various historical reasons, stock and bond trading market fragmentation is more serious. In particular, even in the bond market is divided into the interbank market and exchange market, and the market exists between the pricing model, trust institutions and many other different. On the other hand, the financial market has strong correlations; single market does not exist in isolation, especially the stock market and bond market in China’s securities market. Under the special and relatively complex market structure, there has a certain theoretical and practical significance to study various spillovers between financial markets.Due to a more special structure in stock market and bond market, foreign researches need to be further verified the applicability in China. Although the single market has saved a lot of research, but papers for the stock market and bond market linkages is rare, meanwhile, the method is relatively simple. This paper use the hushen300index and the zhongxiaoban index respectively represent two types of the stock market with different characteristics, and then use the DCC-MVGARCH model to study linkage characters between stock and bond markets. Different from other studies, this paper using daily, weekly data to study the dynamic correlation coefficient between the two markets, and then the establish the VAR model to find the dynamic characters between the dynamic correlation coefficient with various macro factors. Finally, use the impulse response and variance decomposition method to analysis the influence mechanism between macro variables and the correlation coefficient.This paper aims to study whether there is a correlation between the two market return. If exists, how degree of relevance and dynamic situation. According to the research finally enrich the research on the linkage between stock market and bond market, and provides theoretical support for the investors of asset allocation in different markets.Rate of return comovement between the stock market and bond market are closely linked in theory, from the microscopic point of view, the linkage of the capital market can be attributed to the three main channels:firstly, investors have a certain risk preference, asset prices raise to the limit of investors can bear may cause sharp fluctuations in asset, which may may adjust the asset allocation of investor. Secondly, investors in the "liquidity" consideration, may sell another market assets so as to maintain a certain degree of liquidity when suffering the loss;Thirdly, when a certain market has suffered abnormal fluctuations," herding effect" may cause the formation of volatility spillover, from a macro point of view, when the macro economy is in the rising period, the market is generally positive, investors will be more optimistic and have higher risk preference; on the contrary, when the economy is bad, the market traded deserted, investor sentiment is generally low, risk preference is reduced, and they will be more inclined to allocate their asset to bond assets, resulting in capital outflows from the stock market into the bond market.This paper research the relationship between the return rate of stock market and bond market with the methods of qualitative and quantitative. Firstly, the research background and significance, and clearly the purpose of the study; The second step:analyze the mechanism between the bond market and stock market, clarify the inherent mechanism between the two markets return comovement features from macroscopic and microscopic aspects. The third step:briefly introduces the model needed to study, and select the return of stock market and bond market rate index, establishes the DCC-MVGARCH model; The fourth step: Based on dynamic correlation coefficient, established the VAR model; The fifth step:analysis of the empirical results, and summarizes the relevant r ecomm endations.There have three innovations:firstly, based on the trend of differentiation between blue chip stocks and small cap stocks in recent years. This paper has subdivided the stock market into two related but different sub markets, and use the hushen300index and zhongxiaoban index as the indicator to explore whether the institutional investors and small and medium investors in stock market and bond market have obvious difference.Secondly, the stock market and bond dynamic correlation coefficient of the model were taken daily frequency data and weekly frequency data to analysis the linkage in the short-term. To capture the dynamic characteristic of stock market and bond market more accurately; thirdly, use the VAR model for further analysis and show different aspects of the linage between dynamic the dynamic correlation coefficient and macro, micro variables chosen.Based on these analyses, we get the following conclusions:firstly, between the stock market and bond market has linkage characterized by return, in a longer period the linkage almost tends to zero. But with time sequence of different cycle selected, intensity fluctuations are different, weekly time series compared to daily time sequence easier to capture the correlation with the characteristics and trend. Secondly, in the factors which affect the dynamic correlation coefficient. The most significant is the liquidity in the banking system, and also the exchange rate. Compared with these, CPI’s effect is relatively weak. At the same time, the empirical results also show there are many results not suit the theoretical description, mainly displays in:there are no significant differences in linkage between blue chip stock indicators and small and middle chip stock index. Another one, CPI, M2and other macro factors on the dynamic correlation coefficient is relatively weak and can only explain the correlation coefficient changes in a certain degree.Finally, according to empirical research, because there is no dynamic linkage between the long-term stability of the stock market and bond market, this paper believes that investors rationally allocate their assets in the bond market and the stock market in the long run can effectively eliminate the systemic risk. At the same time, because of the connection of two market are not tight enough, and the volatility spillover effect of short-term based on the information generated by impact, difficult to effectively capture, so there are not apparent arbitrage opportunities in the markets. In addition, due to there still exists a gap, which makes the capital flow between the two markets there is still limited, as the main financing market place, which makes our securities market is hard to play the role of the allocation of resources.