Time-varying And Asymmetric Correlation Analysis Of US And Chinese Stock Markets

In recent years,successive crises have confirmed that financial risk is contagious and can be transmitted between different markets,economies and institutions,which has prompted domestic and international researchers to study the contagiousness of financial risk from different angles,making it a hot topic of research at present.The stock market plays an important role in the financial markets of all countries,and as the main vehicle of the capital market,it plays an important role in the financing of capital.Often unusual movements in one important stock market will affect other stock markets.It is therefore important to capture the correlations between financial markets and to assess them using scientific models.Firstly,the SJC-Copula model is constructed to explore the tail correlation of US and Chinese equities and,in the context of the epidemic,to explore whether there is a sudden change in correlation in the context of the epidemic.The results show that,firstly,static and dynamic interdependencies between the Chinese and US stock markets are investigated.From a static perspective,there is very little interdependence between the US and Chinese stock markets.From a time-varying perspective,the time-varying dependence is more significant in the upper and lower tails than the static dependence,but the overall dependence is still small,with only the upper tails of the SHand S&P 500,and the coefficient of dependence in the lower tails of the SZ and S&P 500 abruptly changing to 0.4 or even higher for some time intervals.This suggests that the time-varying dependence between the US and Chinese stock markets will increase significantly during the epidemic.Secondly,the time interval of sudden change in the time-varying coefficient of dependence is selected to further investigate the static and dynamic dependence between the vaccine sector and the S&P 500 based on the background of the new crown pneumonia outbreak,a sudden public health event that occurred during the time interval.From a static perspective,although its static upper-tail dependence coefficient is nearly five times higher than the above-mentioned static upper-tail dependence coefficient between the indices,the static upper and lower-tail dependence between the vaccine sector and the S&P 500 is still insignificant.Secondly,in order to further explore the interdependence between the US and Chinese markets,the Cross-quantilogram model was introduced to take into account factors such as time lag and quantile dependence,and to explore the full range of interdependence between the US and Chinese markets in three dimensions,namely depth,persistence and direction,in order to provide investors and investment institutions with a more complete investment reference.The following findings were obtained: firstly,there is a strong significance of the first-order lag from the US market to the Chinese market in the lower,middle and upper quartiles,especially when the US market is subject to a large negative shock leading to an extreme decline in the US market,the Chinese market will simultaneously experience the same decline on the corresponding day.Specifically,this means that the US market and the Chinese market are "up and down together",so that if the US market has a large loss/gain,there is a high probability that the Chinese market will also have a large loss/gain on the following trading day.Secondly,in terms of the direction of the spillover effect,there is a two-way spillover effect between the Chinese market and the US market,but the spillover is asymmetric,with the spillover effect from the US market to the Chinese market being significantly stronger than the spillover effect from the Chinese market to the US market under the first-order lag condition.In addition,when there is an extreme down/average/up market in the US market,there is a higher probability of an extreme down/average/up market in the Chinese market,with the probability of an extreme down market in the US market being greater than that of an extreme down market in the Chinese market.Finally,it is an important reference for Chinese investors and investment institutions when making investment decisions between the US and China markets.Based on the knowledge that the 1st order lagged spillover transmission from the US market to the Chinese market is significant in the low,medium and high quartiles and has a certain depth of dependence,and that in the low quartile,i.e.when the US market is extremely down,the Chinese market lags one trading day with a Cross-quntilogram value of 0.6 or more,indicating that the Chinese market is more likely to will fall.As investors and investment institutions,they can hedge or speculate in the stock index futures market to obtain a relatively high probability of profit.