A Comparative Analysis of the Chinese and the US Stock–Bond Risk Contagion and its Interaction Mechanism

The paper examines the dependence and risk spillover effects between the stock and bond markets over the period from 2005 to 2019 in a China–US comparative setting. We focus on the two markets’ interaction mechanisms, thus facilitating risk resistance policies and providing asset allocation guidance. We employ the Copula-DCC-GARCH and MVMQ-CAViaR models to study the contagion of volatility and tail risks. Our results show that the US market can absorb external information shocks faster than the Chinese market, and the dependency is more affected by investor behavior. The tail risk spillover effect is significant in bull and fluctuating periods, but not in bear market periods. The impact of stock market shocks on the bond market is smaller than the impact of bond market shocks on the stock market.