The Spillover Effect Between China's Stock And Bond Market And Its Impact Factors

Finance is the core competitiveness of a country,and the stock market and bond market are the core of China's security markets.The interconnection between the two is the key to ensuring the effective implementation of monetary policy and maintaining financial stability.Therefore,it is meaningful to study the spillover effect and its impact factors.It helps us to learn the transmission of financial risk,which provides theoretical and practical significance for the formulation of regulatory measures.On the other hand,it provides guidance for investors in building asset portfolios and conducting risk management.By reviewing the development history of China's stock market and bond market,analyzing the closing price of the CSI 300 index and the China Bond Composite Index,this paper finds that the correlation of China's stock-bond market changes in different time periods.Secondly,this paper conducts an affine pricing model of the correlation of China's stock and bond market and studies the mechanism of four different factors on the relationship of the correlation.And then,this paper chooses data of CSI 300 index and the China Bond Index ranging from April 11,2002 to December 14,2018.The VAR model and the asymmetric BEKK-GARCH model are first established to study the spillover effect of China's stock-bond market.Then,we use the DCC-GARCH model to measure the correlation coefficient of stocks and bonds,and establish the ARDL model to study whether macroeconomic factors,uncertain factors,the liquidity factorsand the openness factor have relationship with the coefficient.We find that the stock market has a one-way average spillover effect on the bond market and both the two markets have the volatity spillover effect on each other.The results also show that macroeconomic factors and uncertain factors have significant impacts on the correlation of stock and bond.More specifically,interest rates,unexpected interest rate fluctuations,industrial growth rates and economic policy uncertainty are significantly positively correlated with the correlation,while unrealistic fluctuations of the real economy are significantly negatively correlated with the correlation.In view of the empirical conclusions,this paper proposes to investors to adopt appropriate portfolio strategy according to the current market,so as to achieve the higher return of minimum risk;to the regulatory authorities to decrease the market segmentation,enhance information transmission efficiency,strengthen the ability of risk management to promote the smooth operation of the financial system,pay close attention to relevant indicators and guide the financial market to develop in a healthy way.