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The linkage between stock and inter-bank bond markets in China: a dynamic conditional correlation (DCC) analysis

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  • Ahmed Hassanein
  • Hanaa Elgohari

Abstract

This study applies the Dynamic Conditional Correlation (DCC) model to investigate the correlation between stock and inter-bank bond markets in China over the period from 2002 to 2016. The study finds no conditional correlation between China's stock and bond markets over the sample period. However, after dividing the sample into four different time scales, we find a significant correlation for the following periods: bond market fluctuations (2002-2005), recovery and persistence (2010-2013), and stock market shock (2014-2016). However, there is an insignificant correlation during the Global Financial Crisis (2006-2009). Further, we apply the BEKK model as a confirmatory analysis and find the presence of spillover effects between the stock and bond markets in both directions during the following periods: bond market fluctuations, recovery and persistence, and stock market shock. These results suggest that the correlation between the stock and bond markets in China is a time dependent.

Suggested Citation

  • Ahmed Hassanein & Hanaa Elgohari, 2020. "The linkage between stock and inter-bank bond markets in China: a dynamic conditional correlation (DCC) analysis," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 20(1), pages 80-99.
    • Handle: RePEc:ids:ijecbr:v:20:y:2020:i:1:p:80-99
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    Cited by:

    1. Hassanein, Ahmed, 2022. "Risk reporting and stock return in the UK: Does market competition Matter?," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    2. Ahmed Hassanein & Jamal Ali Al-Khasawneh & Hany Elzahar, 2022. "R&D expenditure and managerial ownership: evidence from firms of high-vs-low R&D intensity," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 21(3), pages 654-672, January.

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