An empirical study on the comovement between stock market and Treasury bond market

Return comovement and liquidity comovement of financial assets is a fundamental issue of financial management. With VAR models, comovement between Shanghai stock market and Shanghai Treasury bond market has been analyzed in this paper. The empirical findings are as follow: (1) the long-term cointegration between the close prices of Shanghai stock market and Shanghai Treasury bond market exists, and the close price of Treasury bond is the Granger causality of the close price of stock. (2) The long-term cointegration between the liquidity of Shanghai stock market and Shanghai Treasury bond market exists, and the liquidity of Treasury bond is the Granger causality of the liquidity of stock.