The relationship between yield curve components and equity sectorial indices: Evidence from China

Author First name, Last name, Institution

Zaghum Umar, Zayed UniversityFollow
Imran Yousaf, Air University
David Y. Aharon, Ono Academic College

Document Type

Article

Source of Publication

Pacific-Basin Finance Journal

Publication Date

6-1-2021

Abstract

This paper examines the static and dynamic connectedness (returns and volatility) between the components of the sovereign yield curve (level, slope, curvature) and sectorial equity indices in China. We document a strong connection between these factors, particularly during three periods: the August 2011 stock market crash, the 2015 Chinese stock market crash and the 2018 US-China trade war. Our results show that the level component of the yield curve is a net transmitter of return spillovers, whereas the curvature component of the yield curve is a net transmitter of volatility spillovers. These findings may be useful for portfolio managers and policymakers making decisions regarding portfolio allocations, risk management, and monetary policy.

DOI Link

10.1016/j.pacfin.2021.101591

Publisher

Elsevier

Volume

68

Disciplines

Business

Keywords

Static spillover, Rolling spillover, Yield curve, Equity sectors, Financial crisis, Trade wars, Connectedness

Scopus ID

85107633032

Recommended Citation

Umar, Zaghum; Yousaf, Imran; and Aharon, David Y., "The relationship between yield curve components and equity sectorial indices: Evidence from China" (2021). All Works. 4304.
https://zuscholars.zu.ac.ae/works/4304

Indexed in Scopus

yes

Open Access

no