The Dynamic Correlation Studies Between China’s Corporate Bond Credit Spreads And Liquidity Premium,based On The Mechanism Of Markov Switching Models

Since 2008,the US subprime mortgage crisis evolved into the financial crisis,the corporate bond asset values fell sharply,big swings in credit spreads and default risk,liquidity risk increasingly highlight,investors have become increasingly aware of the importance of liquidity of corporate bonds.Scholars at home and abroad in the study of factors affecting credit spreads found that the risk of default is not a very good explanation,the explain ability after joining liquidity influence factor was improved.The dynamic correlation between corporate bond credit spreads and liquidity premium become a hot research gradually,the studies of the dynamic correlations between them can provide the basis for corporate bonds pricing research in China,avoid the risk of corporate bonds implied for investors effectively to provide the reference,provide guidance for China’s financial regulators,promote the development of capital market in China.This paper first defines the corporate bonds,credit spreads,the connotation of the liquidity premium and markov switching mechanism in our country,on the basis of domestic and foreign relevant theories,we verified the markov switching mechanism exist in the bond market in China,and based on the empirical research on the dynamic correlation between them,we rating classification for the corporate bond after controlling other factors that affect the corporate bond credit,research on the relation between our country corporate bond credit spreads and liquidity premium in the period of stable and fluctuation of economic development is significant different.The innovation of this paper is that the dynamic link of changes in China’s corporate bond credit spreads and liquidity premium,studies the dynamic correlation between the two,the dynamic correlation between the two is how to change in the condition of different economic development after join other factors.In this article,through the empirical study we found that markov switching mechanism is exist in China’s corporate bond market,which is under the condition of different economic state credit spread changes mechanism is different,and there are significant ARCH effect.The empirical results found that the liquidity premium has become the important factors that affect China’s corporate bond credit spreads,also found that substitution effect between stock market and bond market in China.In the state of economic fluctuations,there is positive correlation between credit spread changes and liquidity premium,in steady economic operation condition,there is no correlation between them.the duration of economic fluctuation state reach 43 weeks,and the steady economic periods will only maintain more than 1 week or so.The dynamic correlation effect between Corporate bond credit spreads under the conditions of different credit ratings and liquidity premium is different.Corporate bond credit rating is lower,the more obvious positive correlation,the higher the level of credit,the less correlation,the change of credit rating must be considered in the research of credit spread.