The Research On Comovement Between Stock And Bond Markets By BVAR Model

Stock markets and bond markets not only are the main source offunding for the real economy, but also reflect an important aspect ofChina’s economic performance. With the continuous development ofChina’s real economy and openness of financial markets, research oncomovement relations between the stock and bond markets can providepolicy recommendations to promote macroeconomic developments, sothat financial markets and serve the real economy better. Furthermoreunderstanding the transmission mechanism of the interaction among canstop timely control of financial risks from spreading to ensure the healthydevelopment of national economy. On the other hand, it can provideinvestment advice to investors asset allocation strategy.As numerous studies have shown a significant spillover effect ofChina’s securities market, I do some quantitative research in mechanismbetween the two markets, effect pathways，the direction, intensity, scope,performance and lag periods of time in this paper. Firstly, based on the theoretical analysis, I choose somemacroeconomic variables a pathway, such as the rate of inflation, interestrates, exchange rates and money supply to established VAR model byGranger causality test, variance decomposition, impulse responsefunction, error correction model. Using the method of least squares (OLS)and Bayesian methods (BVAR) model, which can use the priorinformation to get a better fitting effect, estimate the VAR models.Analyzed of the findings and proposed to strengthen the stock marketprice discovery mechanism, adjusting the structure of the stock marketand other policy recommendations.