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An Empirical Research on Volatility Asymmetry between Chinese Bond and Stock Market

Author: LuXianWei
Tutor: DongDaYong
School: Southwest Jiaotong University
Course: Finance
Keywords: The stock market - the bond market ADVECH model Asymmetry Economic value
CLC: F832.51
Type: Master's thesis
Year: 2010
Downloads: 166
Quote: 1
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Abstract


The linkage between the capital market plays an important role in the analysis of signal transduction, portfolio selection and risk management. As an important part of China's capital market, the linkage between the stock market and the bond market has drawn wide attention. The risk of the portfolio of financial assets depends not only on the risk of individual securities and investment in the proportion of the covariance of the securities in the portfolio. Financial markets, one of the main characteristics is the return on assets sequence generated by the impact of negative information asymmetry, and thus, in the research market volatility we must consider the impact of information under the impact of non-symmetry. The stock market and the bond market will be the same impact to the information, it leads to the same direction of the bond market and the stock market fluctuations in the market. Faced with the impact of the information, the bond market and the stock market is also facing the impact of the opposing information, information about the impact of this opposition is the positive impact of information on a market to another market, but the impact of negative information. As the effect of the presence of asymmetric information under the impact of the financial market asymmetric effect exists not only variance and covariance asymmetric effect. Thus portrayed between the bond market and stock market volatility, not only to consider the impact of the same direction information asymmetric effect, should also consider the reverse information under the impact of the asymmetric effect. In this study, the linkage of non-symmetry of the asymmetric angle VECH (ADAECH) model, the empirical study of China's bond market and the stock market by information impact. Choose the actual management of the portfolio volatility model during model selection when you need to measure the economic value model and depiction of precision, using sample data within the data and samples outside inspection, to be judged on the choice of model . Studies have shown that with the presence of asymmetric information on the market conditions of the bond and stock markets covariance effect; relative to the positive impact of the two markets are facing a negative shock of the two markets will lead to greater between the two conditions Association variance. Reverse there are asymmetric effect of information on the impact of the covariance of bond and stock market conditions; bond market by the impact of negative information, and the stock market by the impact of positive information asymmetric effect significantly, while the bond market by the impact of positive information, the stock market by asymmetric effect of the impact of negative information did not pass the test of significance. The consider the the opposite direction shock ADVECH model derived by the model in the test sample and sample data, statistical significance and economic value than DVECH model. This means that in considering the relationship between the bond market and the stock market, not only to consider the impact of the same direction information asymmetry affect linkage relationship between the two cities, but also consider the opposite direction information impact on cities linkage between asymmetry, better decision-making goals.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial market
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