An Empirical Study On The Spillover Effect Of National Debt Market And Stock Market

Intricate relationships exist between China’s stock market and the public debt market, which are two significant submarkets of China’s financial markets. With the development of many years, the two markets gradually transform from the instability in the beginning to maturity, and both of the two markets are playing an increasingly important role in direct financing and improve the allocation of resources. However, compared with the western improved countries, the two markets still have some congenital defects in structure and institution, especially the public debt market; it is still in a serious state of division. According to different trading venues, the public debt market can be divided into The Shanghai government bond market and bank inquisitive national debt market. When researching the relationships between the stock market and the public debt market, the majority of articles take The Shanghai government bond market as a representative of the public debt market, while ignore the influence of the bank inquisitive national debt market. Considering this irrationality, this article divide the public debt market into The Shanghai government bond market and bank inquisitive national debt market, and then analyze the relationships between the stock market and the public debt market by making empirical research of mean spillover effects, volatility spillover effects and dynamic correlation.The data of this research include the Government Bond Index, inter-bank bond index and the Shanghai Composite Index between April29,2005and November19,2013. In terms of the research of mean spillover effects, firstly, this article makes the stationary test, and then constructs the VAR (4) model according the criterion of LR> FPE> AIC> SC and HQ, and concludes that compared to the influence of stock market on bond market, the influence of bond market on stock market is less;Secondly, on the basis of the VAR (4) model, this article implements Granger causality test, impulse response functions and variance decomposition analysis, and makes a conclusion that at the95%confidence level, the inter-bank bond market and the Shanghai government bond market are mutual Granger causality, and the Shanghai stock market is the indirection Granger causality of inter-bank bond market, however no significant Granger causality between the Shanghai stock market and The Shanghai government bond market. Market always response rapidly to and more easily absorb the information produced by itself. By contrast, for the information come from other markets, a market always response slowly and absorb difficultly. In addition, comparing to the contribution government bond market make to stock market, the contribution stock market make to government bond market is some larger. For the public debt market, the contribution the Shanghai government bond market make to inter-bank bond market is some larger is larger than that the inter-bank bond market make to the Shanghai government bond market.In terms of the volatility spillover effects analysis, this article construct the BEKK model, coming into the conclusion that the volatility of the three markets are of clustering, and the volatility spillover effects the two bond markets have on the stock market are lager then that the stock market have on the two bond markets. And there are some two-way volatility spillover effects between the two bonds market. In terms of the dynamic correlation, this article utilizes the DCC model which is popular nowadays and the AG-DCC model, bring into which the consideration of asymmetric shocks between the financial asset on the basis of DCC model put forward in2006. With statistical description on time-varying coefficients, it is found that the two results are of no significant difference, however, what can be further seen from the results of AG-DCC model is that the Shanghai government bond market, Shanghai stock market and inter-bank bond market are all impacted by the new information, and the new information’s impacts on the three market yields are positive. Fluctuations in the three financial market yields are of strong persistence, which means the asymmetric impacts on the dynamic correlation among the three markets are all affected.It is summarized at the end of this article, and this article not only makes a few suggestions on how to eliminate of the division of debt and to promote the harmonious development of the bond market, but also clears some of the shortcomings and deficiencies of this article. It can be seen that the bond market and the stock market are mutually influenced, and each market’s harmonious is the necessity of promoting all markets to develop healthily and steadily.