Author(s)

Xuejin Zhao¹, Han Zhang²

¹School of Business Administration, South China University of Technology, Guangzhou, China.
²Shenzhen Central Sub-Branch of the People’s Bank of China, Shenzhen, China.

This paper investigates the issue of co-movement and interaction among the monetary, foreign exchange and stock markets by employing the data from China’s financial markets. Based on the ICA-EGARCH-M model, we explore the volatility spillover effects so as to illustrate the overall co-movements across financial markets. Furthermore, in order to observe the multi-market dynamic relationship variation process, we calculate the dynamic correlation coefficients with the AG-DCC-MGARCH model. Our findings provide both static and dynamic evidence on the co-movement and interaction effects of financial markets which may lead to the systemic financial risk.

Co-Movement, Interaction, Financial Markets, Spillover Effect, Dynamic Correlation

Zhao, X. and Zhang, H. (2017) Co-Movement and Interaction Effects across the Monetary, Foreign Exchange and Stock Markets: Evidence from China. Journal of Financial Risk Management, 6, 247-255. doi: 10.4236/jfrm.2017.63018.