Research On Price Comovement Of China’s Stock And Bond Markets

This paper studies price comovement of China’s stock and bond markets from2000to2011, and analyzes that behavior of securities investment fund (Abbreviates"SIF") had impact on the comovement. The paper describes the development process of the stock and bond markets, and analyzes price volatility of the stock and bond markets through descriptive analysis and ARCH model; then, studies the price comovement of stock and bond markets by VAR and bivariate GARCH model; finally, describes the development of SIF, and analyzes if SIF’s bahaviour including rate of return, portfolio and herding behavior had impact on price comovement of stock and bond markets. The main conclusion is as follows:First, the issuance, financing and trade of the stock and bond markets had achieved relatively smooth growth and remarkable results.But the stock and bond market prices were high volatility, and this volatility was time-varying and Asymmetry. The conclusion also shows that the volatility of the stock market price was greater than the bond market price, volatility of Shenzhen Stock Exchange was greater than volatility of the Shanghai Stock Exchange, volatility of Treasury bill was greater than volatility of corporate bonds.Secondly, the full sample VAR model shows that a low degree of relationship between the stock and bond prices, and this relationship was asymmetric, i.e., the impact of bond price on stock price was greater than the impact of stock price on bond price;the sub-sample VAR model indicates price comovement of stock and bond was time-varying; bivariate GARCH model also proves that price comovement of stock and bond market existed, and the comovement was asymmetric and time-varying.Thirdly, analysis of SIF’s index shows that there was a strong relationship between SIF’s index and stock market price, and there was a weak relationship between SIF’s index and bond market price; rate of return, portfolio and herding behavior of SIF had effect on price comovement of stock and bond market, which indicate that SIF had an impact on stock and bond market price.