Research On The Influence Of Financial Uncertainty On The Co-movements Of Financial Markets Liquidity

Sufficient liquidity is an important prerequisite for the healthy and stable development of financial markets.However,financial uncertainty will not only affect the liquidity fluctuation of an individual financial market,but also impact the whole liquidity of financial markets.In addition,the co-movements of liquidity among financial markets will make the volatility and imbalance of liquidity in a single market spread among different markets,forming a liquidity spiral,which will further expand such influence,and may cause financial markets lack of liquidity,or even cause a financial crisis.For China’s financial markets,the stock market makes the real economy and the virtual economy closely linked;The bond market plays an important role in macro-control,reducing social financing costs,structural adjustment and financial reform;The inter-bank market reflects the degree of monetary adequacy and the ease of financing.Therefore,it is of great theoretical value and practical significance for financial markets risk supervision to study the co-movements of three financial markets liquidity under the influence of financial uncertainty.This paper carries out research according to the logical chain of " Literature review,concepts and theoretical mechanism → Introduction of empirical model →Establishment of financial uncertainty index → Influence of financial uncertainty on financial markets liquidity fluctuation → Influence of financial uncertainty on comovements among financial markets liquidity→ Conclusions and policy recommendations".Specifically,this paper is divided into seven chapters.The first chapter is preface,which introduces the research background,purpose and significance,explains the research ideas,content and methods,and analyzes the innovation and shortcomings.The second chapter is a literature review,including the concept of uncertainty and the construction of uncertainty index,liquidity measurement methods of different financial markets,financial markets linkage effect and influencing factors;The third chapter sorts out the theoretical basis of uncertainty and financial markets liquidity,clarifies the theoretical mechanism of co-movements among financial markets liquidity under the influence of financial uncertainty;The fourth chapter introduces the DCC-GARCH-MIDAS-CXD mixed dynamic correlation coefficient model;The fifth chapter constructs the financial uncertainty index,measures the liquidity of the stock market,inter-bank market and bond market,and analyzes the change of the four variables combined with the key financial events during the research period;The sixth chapter uses GARCH-MIDAS-CXD model to analyze the impact of financial uncertainty on liquidity volatility in three financial markets,and uses DCC-GARCH-MIDAS-CXD model to measure the co-movements among three markets under the influence of financial uncertainty,and studies the short-term and long-term correlation changes among three markets;The seventh chapter is the research conclusions and policy recommendations.This paper draws the following research conclusions: 1.In the period of great uncertainty,the government may intervene in markets liquidity,which increases the liquidity of stock market,inter-bank market and bond market;Since 2018,the liquidity scale of the three markets has increased,and there are obvious structural changes;2.In different financial stages,financial market liquidity fluctuations show asymmetry.When the financial uncertainty increases,the liquidity volatility of the stock market will decrease,while that of the inter-bank market and bond market will increase;3.The increase of financial uncertainty will weaken the liquidity correlation between the stock market and the inter-bank market,and between the stock market and the bond market,and enhance the liquidity correlation between the inter-bank market and the bond market,indicating that there is " risk-averse behaviors " between the stock market and the bond market in China;4.In the period of low financial uncertainty,the correlation between inter-bank market and stock market liquidity is positive,and the correlation between stock market and bond market liquidity is negative,and the correlation between stock market and bond market liquidity is positive;In the period of great financial uncertainty,the correlation between interbank market and stock market liquidity turns from positive to negative,while the correlation between stock market and bond market liquidity turns from negative to positive,and the correlation between stock market and bond market liquidity is negative;5.The Chinese government should properly monitor financial uncertainty and strengthen risk prevention and control in advance;Attach importance to the impact of financial uncertainty on the co-movements of liquidity between financial markets and improve the efficiency of policy implementation;Enrich investment riskaverse tools in the financial markets to facilitate the stable development of the financial markets;Coordinate and improve cross-market oversight to better guard against financial risks.The possible innovations of this paper are as follows: First,on the basis of studying the stock market and bond market,this paper also introduces the inter-bank market to study the influence of financial uncertainty on the liquidity correlation changes of the three markets,complementing and improving the research on the comovements of financial markets in China;Second,the DCC-GARCH-MIDAS-CXD mixed dynamic correlation coefficient model is used to study the influence of low frequency financial uncertainty on the high frequency co-movements among financial markets liquidity.Third,this paper not only takes the European debt crisis in 2013 and the "stock market crash" in China in 2015 into account,but also covers the outbreak of COVID-19 in early 2020,which is typical and time-sensitive.Fourth,in addition to the stock market and bond market,the financial uncertainty index constructed in this paper also includes the real estate market and the inter-bank market,which is more in line with China’s conditions.The shortcomings of this paper are as follows: The sample selection of the bond market focuses on the inter-bank bond market,which is insufficient in the comprehensiveness of sample selection and may lead to some deviations in the final empirical results.In addition,the research of this paper does not include the situation before 2010,and the impact of some important uncertainty increases on financial market liquidity,including the 2008 financial crisis,cannot be calculated.