Interdependence between the stock market and the bond market in one country: evidence from the subprime crisis and the European debt crisis
Abstract Background Once a global financial crisis breaks out, the interdependence between different financial markets suddenly increases and leads to a significant contagion. Methods With 39 countries used as samples, this paper analyzes the interdependence between the stock market and the governme...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
SpringerOpen
2017-04-01
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| Series: | Financial Innovation |
| Subjects: | |
| Online Access: | http://link.springer.com/article/10.1186/s40854-017-0055-z |
| _version_ | 1818520042600398848 |
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| author | Ke Cheng Xiaoguang Yang |
| author_facet | Ke Cheng Xiaoguang Yang |
| author_sort | Ke Cheng |
| collection | DOAJ |
| description | Abstract Background Once a global financial crisis breaks out, the interdependence between different financial markets suddenly increases and leads to a significant contagion. Methods With 39 countries used as samples, this paper analyzes the interdependence between the stock market and the government bond market during the crisis periods. Results It proves that the investor focuses more on the safety of their portfolio so there is neither a flight from quality nor a positive spillover during a crisis period. When one market is safer than the other market in the same country, a flight to quality occurs between the two markets; however, when the two markets in one country are both risky, negative spillover appears between these two markets. Conclusions This means a flight to quality from the stock market to the short-term government bond will occur more frequently than will occur from the stock market to the long-term government bond markets. In addition, a flight to quality always emerges in developed markets, while negative spillovers take place in emerging markets and in the PIIGS countries (Portugal, Italy, Ireland, Greece, and Spain, referred to hereon as “PIIGS”) in the European Debt Crisis. |
| first_indexed | 2024-12-11T01:32:07Z |
| format | Article |
| id | doaj.art-c415ad2650694b9d8cbb00a94d8a3d4e |
| institution | Directory Open Access Journal |
| issn | 2199-4730 |
| language | English |
| last_indexed | 2024-12-11T01:32:07Z |
| publishDate | 2017-04-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj.art-c415ad2650694b9d8cbb00a94d8a3d4e2022-12-22T01:25:20ZengSpringerOpenFinancial Innovation2199-47302017-04-013112210.1186/s40854-017-0055-zInterdependence between the stock market and the bond market in one country: evidence from the subprime crisis and the European debt crisisKe Cheng0Xiaoguang Yang1China University of PetroleumChina University of PetroleumAbstract Background Once a global financial crisis breaks out, the interdependence between different financial markets suddenly increases and leads to a significant contagion. Methods With 39 countries used as samples, this paper analyzes the interdependence between the stock market and the government bond market during the crisis periods. Results It proves that the investor focuses more on the safety of their portfolio so there is neither a flight from quality nor a positive spillover during a crisis period. When one market is safer than the other market in the same country, a flight to quality occurs between the two markets; however, when the two markets in one country are both risky, negative spillover appears between these two markets. Conclusions This means a flight to quality from the stock market to the short-term government bond will occur more frequently than will occur from the stock market to the long-term government bond markets. In addition, a flight to quality always emerges in developed markets, while negative spillovers take place in emerging markets and in the PIIGS countries (Portugal, Italy, Ireland, Greece, and Spain, referred to hereon as “PIIGS”) in the European Debt Crisis.http://link.springer.com/article/10.1186/s40854-017-0055-zStock MarketGovernment BondCrisis PeriodBond MarketSovereign Debt |
| spellingShingle | Ke Cheng Xiaoguang Yang Interdependence between the stock market and the bond market in one country: evidence from the subprime crisis and the European debt crisis Financial Innovation Stock Market Government Bond Crisis Period Bond Market Sovereign Debt |
| title | Interdependence between the stock market and the bond market in one country: evidence from the subprime crisis and the European debt crisis |
| title_full | Interdependence between the stock market and the bond market in one country: evidence from the subprime crisis and the European debt crisis |
| title_fullStr | Interdependence between the stock market and the bond market in one country: evidence from the subprime crisis and the European debt crisis |
| title_full_unstemmed | Interdependence between the stock market and the bond market in one country: evidence from the subprime crisis and the European debt crisis |
| title_short | Interdependence between the stock market and the bond market in one country: evidence from the subprime crisis and the European debt crisis |
| title_sort | interdependence between the stock market and the bond market in one country evidence from the subprime crisis and the european debt crisis |
| topic | Stock Market Government Bond Crisis Period Bond Market Sovereign Debt |
| url | http://link.springer.com/article/10.1186/s40854-017-0055-z |
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