A Study Of The Correlation Between Major Assets Of Chinese Financial Market Based On The DCC-MVGARCH Model

With the rapid development of China's capital market,especially after the inclusion of A shares in the MSCI emerging market index,the number of domestic institutional investors is increasing,and the number of products available for investment is increasing.Meanwhile,as China accelerates the development of its own financial market,following the introduction of Shanghai stock connect and Shenzhen stock connect,the science and technology innovation board is started.These measures make the distance between China's financial market and the mature financial market of foreign developed countries gradually narrow.However,there are a large number of asset types in the market,and different assets have different correlations.Therefore,how to allocate assets reasonably and effectively and control risks while ensuring investment returns is crucial.Investing in highly correlated assets has a great impact on both risks and returns,so it is a prerequisite for effective asset allocation to fully grasp the dynamic correlation between different types of assets.Therefore,it is of practical and theoretical significance to study the correlation between China's major assets.This thesis empirically analyzes static and dynamic relationship between major assets in China's financial market through relevant research and empirical analysis.First of all,the static correlation among various kinds of assets is analyzed by means of co-integration relationship test,granger causality test and variance decomposition.Then,the DCC-MVGARCH model was constructed to study the dynamic correlation between various types of assets and put forward some Suggestions for investors.The research conclusions are as follows:Static correlation between Major Assets: There is a one-way Granger causality between the stock market and the bond market or the gold market.There is a one-way Granger causality between commodity market and the bond market or the foreign exchange market as well.There is also a one-way Granger causality between the gold market and foreign exchange market.In addition,the other two are there is no granger causality relationship between other market.At the same time,through variance decomposition found the cause of the market volatility is mostly comes from the market itself.Dynamic correlation between Major Assets: The dynamic correlation coefficientbetween the stock market and the bond market fluctuates violently and is unstable,and has a long-term stable positive correlation with commodities,and an unstable and weak correlation with gold and foreign exchange.The dynamic correlation between the bond market and the commodity fluctuates frequently and alternates between positive and negative constantly,and maintains a long-term negative correlation with gold and foreign exchange.The correlation between commodities and gold fluctuates violently and is mostly positive.However,there is a long-term and stable negative correlation between gold and foreign exchange.Finally,according to the research and analysis,the conclusion is drawn that investors should clearly grasp the dynamic correlation between assets and make reasonable allocation of major assets.The allocation ratio of each category of assets should be linked to the dynamic correlation coefficient between assets,so that the portfolio risk can be reasonably reduced.Especially when the financial market has an emergency or major event,the asset portfolio should be appropriately adjusted according to the relationship between assets and the latest market conditions.