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Time-Varying Comovement of Chinese Stock and Government Bond Markets: Flight to Safe Haven

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  • Hyunchul Lee
  • Kyungtag Lee
  • Xinrong Zhang

Abstract

This article examines the impact of financial market uncertainty on comovement between Chinese government bond and stock markets proxied by realized correlations of the asset returns over the whole sample period 2003Q.2–2016Q.4. We find evidence that a future financial market uncertainty has a negative effect on the comovement between the two markets. This suggests that the flight to safe haven phenomenon remains valid for interdependence of Chinese stock and government bond markets. Our main finding is crucial for joint pricing for stock and bond assets in their portfolios and for stabilizing the financial markets.

Suggested Citation

  • Hyunchul Lee & Kyungtag Lee & Xinrong Zhang, 2019. "Time-Varying Comovement of Chinese Stock and Government Bond Markets: Flight to Safe Haven," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(13), pages 3058-3068, October.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:13:p:3058-3068
    DOI: 10.1080/1540496X.2018.1543583
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    Cited by:

    1. Chi-Wei Su & Xu-Yu Cai & Ran Tao, 2020. "Can Stock Investor Sentiment Be Contagious in China?," Sustainability, MDPI, vol. 12(4), pages 1-16, February.
    2. Umar, Zaghum & Yousaf, Imran & Aharon, David Y., 2021. "The relationship between yield curve components and equity sectorial indices: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    3. Devpura, Neluka & Narayan, Paresh Kumar & Sharma, Susan Sunila, 2021. "Bond return predictability: Evidence from 25 OECD countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    4. Wei Huang & Meng-Shiuh Chang, 2021. "Gold and Government Bonds as Safe-Haven Assets Against Stock Market Turbulence in China," SAGE Open, , vol. 11(1), pages 21582440219, January.
    5. Umar, Zaghum & Riaz, Yasir & Shahab, Yasir & Teplova, Tamara, 2023. "Network connectedness of the term structure of yield curve and global Sukuks," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    6. Lee, Hyunchul, 2021. "Time-varying comovement of stock and treasury bond markets in Europe: A quantile regression approach," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 1-20.

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