The Volatility Spillover Effect of Chinese Stock and Bond Markets——An Empirical Analysis based on the Exchange and Inter-bank Market

Because of the relative isolation of Chinese stock and bond market,the research on the volatility spillover effect between two markets is of far-reaching significance in realizing the effective allocation of resources and information flow.On the basis of a DVAR model,the paper employs Wald and LR test to prove the existence of volatility spillover effect between two markets,but the overall spillover impacts are weak.By using VECM model,the paper analyzes the intrinsic volatility relationships among the exchange bond market,the inter-bank bond market and the stock market.The result shows that the exchange bond market makes greater impacts on the volatility of the stock market than the interbank bond market,while the interbank bond is affected by the exchange bond market much more dramatically.In brief,the efficiency of financial resource allocation is still low between two markets and the capital and investors have not formed an effective chain reaction system,both of which result in that market risks cannot be released.Therefore,it is urgent for China to establish the coordination and interaction mechanism.