The Financial Contagion between the Chinese Stock Market and Bond Market: Based On MVMQ-CAViaR Model
Shandan Wu

Abstract
In 2015-2016, the Chinese stock market experienced severe price fluctuations. This paper studies the extreme risk spillover effect between stock price and bond price by constructing MVMQ-CAViaR model and analyzes the dynamic impact of market shock on the tail risk of market using quantile impulse response. The study finds that the stock market and the bond market have asymmetric financial contagion effects. Specifically, the stock market has a significant risk spillover effect on the bond market, the stock price and the bond price change in the opposite direction, which is consistent with the "flight-to-quality" effect. The impact of the bond market on the stock market is very weak, only the increase in the risk of national bonds, causing the stock market prices to decline, there is a co-movement between the two market prices. The conclusion of this paper provides an important theoretical basis for promoting the further development of China's stock market and bond market.

Full Text: PDF