Research Of Liquidity Linkage Relationship Of Stock Market And Bond Market

In the capital market with free movement of capital and full disclosure of information,in theory,various financial markets can interact each other and fix a price,asset prices fully reflect all public information on the market.Under the guidance of price signals of financial assets,the capital flows rationally and quickly,guides the capital redistribution in the two markets,exists relations between markets in terms of yield,volatility and liquidity,so as to show the relationship between the two markets.Stock market and bond market are important places of financial asset allocation,the linkage between the markets is the sign of its maturity.Liquidity is an important test index for the healthy development of capital market.There are following meanings of exploring linkage relationship and influence flow between stock market and bond market factors:firstly,it theoretically enriches and complements the research of relation between market liquidity and inner mechanism,helps investors improve returns and asset allocation;Secondly,it enriches the research on influencing factors of liquidity,provides good policy recommendations for managers;Thirdly,it improves the efficiency of asset allocation of the financial market,explore the market liquidity situation,and lay the foundation of promoting the healthy development of China’s capital market.Because of China’s financial market is not perfect and developed,it may show market characteristics different from mature financial markets.This paper aims to study whether exists liquidity linkage relationship between stock market and bond market in China,at the same time,whether the liquidity linkage relationship between the two markets will appear the phenomenon of alienation in the stock market cycle,as well as the effect of common information(money supply,inflation)and the single market information(investor sentiment)for liquidity linkage relationship between stock market and bond market.This article is divided into five chapters.The first chapter is the introduction,which introduces the topic background,theoretical significance and practical value,domestic and international literature review,research ideas,methods,as well as the innovations and shortcomings of this article.The second chapter expounds the related theory of the liquidity linkage relationship between stock market and bond market,including the definition and level of market liquidity,many measuring method of liquidity,market linkage relationship,and conduction mechanism of common information(money supply,inflation)and single market information(investor sentiment)on two markets linkage relationship,at the same time,according to the situation of Chinese stock market and bond market corresponding hypotheses are proposed.The third chapter is the empirical analysis of liquidity linkage relationship for stock market and bond market.First is according to the Amihud(2002)and Hasbrouck(2006)methods to construct stock market and bond market illiquidity indicators,and build the VAR model;Second,select Shanghai and Shenzhen 300 index and CITIC S&P bond index respectively construct stock market and bond market illiquidity indexes,carrying on the descriptive statistics analysis;Again,according to theory of the market liquidity linkage relationships,using weekly data from January 2005 to December 2015 to empirical test through the VAR model,Granger causality test,impulse response analysis;Finally,according to the cyclical fluctuations of stock market,the market will be divided into bull market,bear market and shocking market,using Granger causality test and impulse response analysis respectively explore whether liquidity linkage relationship between two markets in three kinds of market will appear dissimilation.The fourth chapter is the empirical analysis of the influence of common information and the single market information and for two markets.The method is the same as the third chapter,using monthly data from January 2005 to December 2015 to analyze the liquidity relationship between stock market and bond market,then common information such as money supply and inflation,and investor sentiment on behalf of the single market information were added to the VAR model respectively,through Granger causality test and impulse response function analysis to explore the money supply,inflation and investor sentiment to the influence degree of two markets’liquidity linkage relationship.The fifth chapter is the research conclusion and policy suggestions.The conclusions are as follows:according to the weekly data analysis,liquidity between stock market and bond market has a negative relationship.Liquidity of the stock market is the Granger reason of liquidity of the bond market,conversely is not;Phased study of two markets liquidity linkage relationship,we can conclude that in the two stages before November 2008,there is no causal Grainger the relationship between liquidity between the two markets;After November 2008 in the phase three,five and six,liquidity of stock market is the Granger reason of liquidity of bond market,and in the phase four,liquidity of bond market is the Granger reason of liquidity of stock market,and the linkage is a single direction.At the same time,from the overall point of view:liquidity relationship has a same direction in bull market,liquidity relationship has a reverse direction in bear market,and shocking market changes liquidity relationship back and forth between the same and reverse direction.The results show that the market is not closely linked,and the stock market cycle is complex and changeable.According to monthly data analysis,the liquidity between stock market and bond market exists a negative relationship,liquidity of stock market can cause the bond market liquidity changes,similar to the conclusion on the weekly data;According to conclusion from common information(money supply,inflation)and single market information(investor sentiment),we can found that the increase in inflation rate,money supply and stock market’s investor optimistic,investors will increase investment in the stock market,reduce investment in the bond market,the liquidity between the two markets is negatively correlated,but changes in size.