Research On The Relativity Between Stock Market And Bond Market

Financial market has an important role in promoting economic development andeconomic efficiency. China’s financial market began to join with the internationalfinancial market from the beginning of the90’s of last century. Therefore theeconomic contact between China and Western developed countries became moreclosely. With the continuous expanding of the size of China’s financial market, thereare more kinds of financial products. The relationship between them becomes morecomplex. The relativity between different parts of a country’s domestic financialmarket and different countries’ financial markets both become stronger.Stock market and bond market are both very important components of thefinancial market. The way to configure and adjust the proportion of funds betweenstock market and bond market is important for the investors, and the relativitybetween stock market and the bond market also directly affects policy formulations ofthe government.This paper summarizes the existing research achievements of this field first, thenanalyzing the basic theory of the relativity between stock market and bond marketon the Portfolio Theory and the Asset Pricing Theory. After that, this paper analyzesthe changes in the indices trends of stock markets and bond markets within a certainperiod of time of China and the U.S. by using empirical methods, then the relativitybetween stock market and the bond market between the two countries. The resultshows that the substitution effect exists in stock market and bond market of the twocountries individually, also between the two countries. Then this paper focuses on thefeatures of China’s stock market and the bond market. At last, this paper makes somesuggestions on the continuous development of the China’s financial market.