Effects Of Volatility Shocks On The Correlation Of Chinese Sock Price,Interest Rate And Exchange Rate

Since the reform and opening up policy is performed,the construction of Chinese financial market gradually improved,with the gradual improvement of the money market,foreign exchange market and the stock market,interaction between these three markets had attracted more and more attention from scholars and researchers.In the study of these three financial variables,people usually focus on the correlation significance of the three variables and their interact characteristics,but few people pay attention to the contagion effect between the three variables after one of them just received volatility shocks.Since fluctuation is seemed as one of the major risks in financial market,this paper aims to observe the response of the financial market after it just received a volatility shock,and find whether there are contagion effects between the exchange market,interest market and the stock market,and analyze the duration and severity of the volatility shocks.The empirical part of this paper has gathered the data of HS300 index,USD/CNY exchange rate and Shibor(on)during the decade of 2006 to 2016,and is going to analyze the interaction characteristics between the three data groups by VAR model.After then the data groups are also used to detect the severity,duration,and positive negative character of the impact from one variable to the other two variables after the one receives volatility shocks through IRF model.After that,the spillover effects between the variables are going to be found through VAR-MGARCH model.At last,this paper will provide investment strategies and policy advices to investors and policy makers who may encounter volatility shock risks.