Research On The Correlation Between Stock Market And Bond Market In China

Studying the correlation between stock market and bond market has a positive significance for investors to conduct portfolio and risk management.Based on the Copula theory,this paper uses five static Copula models and one dynamic Copula model to study the correlation between China’s stock and bond markets from 2008 to 2018.The results of the static Copula model show that: there is a strong positive correlation between Shanghai stock market and Shenzhen stock market,and there is a significant asymmetric tail correlation,so the Clayton-Copula and Gumbel-copula functions with asymmetry are more suitable to describe the correlation structure between China’s two stock markets.There is a weak negative correlation between the stock market and the bond market in China,the upper tail correlation coefficients and lower tail correlation coefficients estimated by various static type Copula models are very close to 0.This correlation avoids the mutual contagion of systemic risks under extreme conditions,which is objectively conducive to maintaining financial stability.The results of time-varying Copula model show that the linear correlation between Shanghai stock market and Shenzhen stock market,and between stock market and bond market in China has obvious time-variability.In addition,the correlation between the stock and bond markets is highly volatile,so the use of time-varying Copula model can help investors better grasp the positive and negative changes of correlation,so as to control the risk of portfolio.In addition,the main factors affecting the correlation between stock and bond yields in China are analyzed and discussed,and it is found that exchange rate and economic performance will have significant influence on the correlation between stock and bond yields in China.