Research On Stock And Bond Market Comovements Based On Markov State Transition Copula Model

Asset correlation analysis is an important subject of empirical finance.The research on the comovements characteristics of different market financial instruments can help to describe the mutual influence of income and risk.The relationship between capital market comovements analysis in information transmission,which plays an important role in portfolio selection and risk management.The characterization of the comovements relationship between markets can make the dynamic correlation between stock market and bond market more intuitive and show the tail correlation between the two cities.In this paper,explores the relationship between stock market and bond market by Markov state transfer Copula model and based on the asymmetry between stock market and bond market.The state transition of stock market and bond market is used to describe the asymmetric state change process and the combination of Copula model and Markov state transfer is used to analyze the index of eight markets in four countries.According to the peak tail characteristics of stock market and bond market,the GARCH-M model is established and proved by serial correlation test correlation test and normality test.The empirical results: the sensitivity of the US and Japanese stocks is slightly higher than that of China;the sensitivity of the bond markets in Japan and China is higher than that of Germany and the US.Last the markets volatility of China,US,Germany and Japan are highly persistent.This paper makes use of the Markov state transfer Copula model to carry on the correlation analysis for the inter-market comovements analysis and uses the method of maximum likelihood estimation to estimate the parameters of the model.Finally,the smooth probability graph is combined with the model parameters analyse.The results show that the asymmetry between the Japan markets is stronger than that between the other three countries in the comovements relationship between the stock market and the bond market in the same country.The probability of asymmetric state transition between the America markets is greater than that of the other three countries.In different countries with a stock and bond market between the comovements relationship,the asymmetry between China-Japan markets is stronger than Germany-America markets.Inparticular,the probability of asymmetric state switching in the US-German bond market is less than that in the other two countries.In the comovements relationship between different markets and different markets,the four groups of research samples are almost the same in terms of the asymmetry intensity and the probability of each state transition.Finally,this paper makes a simple application of the influence of the asymmetric conversion probability between stock markets on the basis of empirical research and introduces the dependent variable of exchange rate fluctuation to explore the relationship between the two variables.The results show that the exchange rate fluctuation between the two countries is positively related to the volatility of the stock markets in the two countries.The effect of greater exchange rate volatility on the volatility of the stock markets between the two countries is evident.