Empirical Research on Spillover Effect among Stock, Money and Foreign Exchange Market of China

Abstract

With the openness and marketization of China’s financial market accelerat- ing, the linkage between various financial markets is increasingly significant. By utilizing VAR model and asymmetric GARCH (1,1)-BEKK model, this paper analyzes the price spillover effect and the volatility spillover effect among stocks returns, exchange rate of returns and money rate. The results show that 1) between currency market and stock market there is only unidi- rectional mean spillover effect from currency market to stock market; 2) however, there exists asymmetrical bidirectional mean spillover effect both between stock market and money market and currency market and money market, which exhibits time-varying variance and volatility persistence; 3) there exists bidirectional volatility spillover effect between currency market and money market, however there is only unidirectional volatility spillover effect from stock market to money market, which is demonstrated from money market to currency market.