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.
- Static spillover,
- Rolling spillover,
- Yield curve,
- Equity sectors,
- Financial crisis,
- Trade wars,
- Connectedness
Available at: http://works.bepress.com/zaghum-umar/38/