An Analysis Of Yield And Volatility Relationship Between Domestic Gold Price And Shanghai Composite Index

Stock market and gold market in China, which are learning to crawl like a toddler, isgradually narrowing the strait with the developed countries. These two markets like the Kingand Queen of the financial system. Latest reports from Financial Times said gold may beassociated with emerging market stock movements. In mid-April2013, the price of gold hit a30-year maximum daily slump, while the stock market is indeed another big picture.Therefore, the relationship between these two markets research, especially if there arefluctuations in revenue and between China’s gold market and the stock market conductioneffect, and the impact of the extent and effect between them on how the direction, is prettyinfluential. These will be making a significant contribution investors choosing portfolio forthe future, predicting stock market movements or gold.Firstly, this paper outlines the factors affecting the price of gold and stock indices, aswell as the theoretical basis of the interaction between the two markets revenue, that revenueassets spillover income and substitution effects. Secondly, this article on the development ofChina’s gold market and the stock market has done a brief review, and on this basis, the studyanalyzed the time span of the price of gold and the Shanghai Composite correlation with thetrend. Charts which show the presence of varying complexity both between the two variables,but also show some regularity. Next, this one on its in-depth study to quantify the aid ofeconomic models and statistical methods of measurement.In the empirical research, the article is divided into two parts, one study of therelationship between income, mainly on the data were stationary test, Granger causality test,VAR (Vector Autoregressive) model estimation, impulse response analysis to studyinteractions between variables. Second, studies the relationship between fluctuations, themain use of EGARCH (Generalized Auto Regressive Conditional Heteroskedasticity) modelof the original variables extracted volatility index, and then re-introduced a new variable VARmodel, fluctuations in the relationship between the variables investigated.VAR model statistics showed that between Shanghai and the Shanghai Composite Indexof gold daily yield gains daily yield unilateral spillover effects and the role of the Shanghai Composite day yield of the dominant party. And international market situation is different, notwo markets between domestic income substitution effect. EGARCH model test results showthat between the two there is the unilateral substitution effect of fluctuations, the dominantparty but also for the Index Return. Finally, this paper analyzes the reasons for the empiricalresults exist, and put forward the policy recommendations.