Research on The Volatility Spillover Effect among Foreign Exchange Market Stock Market and Bond Market in China: Based on VS-MSV and CoVaR Models

Abstract

According to the weekly return data of Shanghai composite index, China securities exchange index (net price) and SDR exchange rate index from December 2015 to May 2019, this paper respectively used the VS-MSV model to test the volatility spillover effect, and the CoVaR model to measure the volatility spillover effect in China's foreign exchange bond market. The empirical results show that there is an asymmetric two-way volatility spillover effect between the stock and the foreign exchange market in China, which is 124.7066% and 69.5448% respectively. Between the stock and the bond market, there is only one-way volatility spillover effect of the bond market on the stock market, and the volatility spillover effect is relatively small (2.5515%), while there is no volatility spillover effect of the stock market on the bond market. There is no spillover effect between bond and foreign exchange markets. In recent years, China's foreign exchange share and bond markets have been closely linked. Therefore, it is of great significance to study the spillover effect of fluctuations between foreign exchange share and bond markets to strictly guard against the bottom line of systemic financial risks.