Study On Dynamic Conduction Relations And Volatility Spillover Effect In Chinese Financial Markets

With the rapid development of China's financial industry,the links between financial markets are getting closer.The reform of the financial market system is imperative which will promote the healthy operation and development of the financial market.At the same time,the development of the financial market also promotes the deepening and implementation of the reform of the financial market system.The two complement each other.However,China's financial market started late and the system is not sound enough.With the rapid development of financial markets,cross-market financial derivatives have also increased and the shortcomings of the system have affected the healthy development of financial markets to a certain extent.The resulting cross-market and cross-cutting financial risk is one of the problems that must be faced and solved in the development of China's financial industry.Studying the dynamic relationship between financial markets and spillovers can help us understand the interlinkages between financial markets in order to understand the internal mechanism of financial market operations and help deepen the reform of the market system.In addition,understanding the trans-market cross-cutting financial risk transmission path is also important for improving the ability to prevent and respond to systemic risks.This paper empirically studies the spillover effects of China's major financial markets from two aspects: the dynamic transmission relationship between financial markets and the volatility spillover effect.The representative financial market return rate series of stocks,bonds and foreign exchange were selected to build the time-varying normal Copula function and time-varying SJC-Copula function in order to empirically learn the dynamic conduction correlation between China's major financial markets.The GARCH-BEKK model is used to empirically study the volatility spillover effect between China's major financial markets.We try to explain the reasons through the empirical results and give relevant countermeasures.The GARCH-BEKK model can guarantee the positive definiteness of the variance-covariance matrix under weak conditions which is a good model to study the spillover effect between financial markets.Meanwhile,the time-varying Copula model can make up for the problem that other models can't better describe the dynamics of financial time series.The results of the study show that China's stocks,bonds,and foreign exchange markets have two-way or one-way spillover effects in varying degrees which has a long-term stable equilibrium relationship.In order to promote the reform of China's financial market system,it is necessary to strengthen the construction of market supervision mechanisms and the process of deepening the marketization of financial market development.