Systemic Risk in the Chinese Stock Market Under Different Regimes: A Sector-Level Perspective

Asian Economic and Financial Review

article

Haizhen Yang¹  Xiangjuan Cheng¹  Qiubin Huang²  Qiao Wang¹ 

[1] School of Economics and Management, University of Chinese Academy of Sciences;Donlinks School of Economics and Management, University of Science and Technology Beijing

关键词: Chinese stock market;    Systemic risk;    CoVaR;    Regime switching;    Adjusted BB program;    Bull market;    Bear market;   

DOI  :  10.18488/journal.aefr.2019.96.665.679

学科分类：社会科学、人文和艺术（综合）

来源: Asian Economic and Social Society

【 摘 要 】

This study’s aim is to investigate systemic risk in the Chinese stock market. To this end, we analyze risk contributions to the Chinese stock market from 2007 to 2018 at the sector level using the Conditional Value at Risk (CoVaR) approach proposed by Adrian and Brunnermeier (2016). For the full sample period, we find that the information technology sector is the top contributor to systemic risk in the Chinese stock market. To distinguish the risk contribution of each sector under different market regimes, we propose an adjusted Bry-Boschan program to identify turning points in the stock market, which captures regime shifting between bull and bear markets. We find that the risk contribution of each sector in a bear market is significantly higher than that in the following bull market. We also find that the top contributor to systemic risk in the Chinese stock market changes across market regimes. Our findings have important policy implications. First, policymakers may use the early identification of systemically risky sectors of the stock market to improve the pertinence of economic policy-making. Second, it may allow security regulators to foster an environment in which incentives for risk taking by financial practitioners are reduced.

【 授权许可】

CC BY