Dependent Structure And The Risk Spillover In Domestic And International Financial Market

With the development of economic globalization and financial integration,the links between international financial markets have become increasingly stronger,and the dependent structure has become increasingly complex and diversified.The global financial crisis triggered by the subprime mortgage crisis in the United States in 2007-2008 once again awakened the countries of the world to re-examine their own financial systems and their relationship with international financial markets.Scientifically characterizing the dependent structure and the path of risk transmission in international financial markets has important practical value both for investors'micro-asset allocation and for macro-prudential supervision and risk prevention of regulatory authorities.Based on this,the paper uses domestic and foreign major financial markets as research samples to reveal its correlation structure and.risk spillover relationship.From a technical point of view,an accurate description of the interaction between financial markets relies heavily on accurate financial modeling tools,and one of the key issues is how to measure the interdependencies among multiple assets,which is particularly important for risk assessment and regulation.However,for a long time,financial modeling has mostly considered multivariate normal distribution,assuming that the joint distribution and marginal distribution of return on financial assets follow a normal distribution.A large number of empirical studies show that the distribution of return on financial assets is non-normal,and it has obvious "typical fact" features such as high peak,fat tail and bias.The interdependency among multiple assets also shows significant tail dependence as well as non-linear and asymmetric characteristics.The classical multivariate normal distribution assumption can not reflect the above characteristics and can not meet the need of accurately describing the complicated and dependent structure between financial markets.The Copula function can solve this problem well;it can measure the nonlinear or asymmetric dependencies,and can flexibly construct the dependency structure between assets.In view of this,the paper makes a systematic study of the interdependence between domestic and international financial markets based on the Copula function.Moreover,in order to reveal the extent and direction of risk spillovers among financial markets and the spillover of extreme risks,this paper also uses the Diebold&Yilmaz spillover index model and tail dependency measure to analyze the risk spillover relationships between domestic and foreign financial markets.Specifically,this paper systematically sorts out the interdependence and risk spillover measures between financial markets,summarizes the strengths and weaknesses of each measure,and reveals the internal mechanisms of financial market interdependence and risk spillover.At the level of empirical research,this paper comprehensively reveals the overall picture of the correlation between domestic and foreign financial markets from the aspects of return dependent structure,volatility spillover relationship,and extreme risk spillover.Specific studies works are as follows:First,it studies the return dependent structure between domestic and foreign financial markets.This paper combines the DCC-GARCH model and Copula function to get a new Copula-DCC-GARCH model,and use this model to study the dependence of domestic and foreign stock markets.In order to further observe the time-varying characteristics of the dependence of domestic and foreign stock markets,this paper uses the structural change detection method to detect the structural change points of the dynamic condition correlation coefficient between domestic and foreign stock markets in the world.The empirical results show that:(1)Generally speaking,the dependence of domestic and foreign stock markets is gradually increasing;(2)The dependence of domestic and foreign stock markets is time-varying,and there are 3-4 change points,which are related to the economic and financial fundamentals between domestic and foreign stock markets.(3)From the perspective of country structure,China's stock market and the Asian stock market are the most closely linked,followed by the BRICS countries,and the dependence on European and American stock markets is weak.Secondly,it reveals the volatility spillover relationship between domestic and foreign financial markets.In order to characterize the intensity and direction of volatility spillovers between domestic and foreign financial markets,this paper uses the Diebold&Yilmaz spillover index model to study the spillover relationship between domestic and foreign stock market volatility.The results show that:(1)Generally speaking,the spillover effect of volatility in the domestic and international stock markets is greater than the spillover effect of returns,and the total external spillover effect of returns and volatilities has time-variability and asymmetry.(2)Developed countries in Europe and the United States have more spillovers over other markets than other stock markets to them,which are net transmitters of spillovers.Conversely,South Korea,Japan and BRICS stock markets are net receivers of spillovers.This shows that mature markets such as developed countries have a high level of openness and occupy an important influence in the international stock market.(3)The volatility spillover effect has the characteristics of aggregation,which shows different performance during the economic crisis and economic stabilization,with large volatility spillover effect during the crisis period.During the global financial crisis in 2008,the volatility spillover effect of the international stock market showed a jumpy increase.Thirdly,it studies the extreme risk spillovers between domestic and foreign financial markets.This paper firstly uses three different Vine Copula models to characterize the overall dependence structure of the international stock market.Then,the tail dependence measure is used to examine the risk spillover between each two stock markets.The results show that:(1)The dependent structure of international stock markets presents some characteristics of economic agglomeration,and the dependent structure is slightly different with different Vine Copula models.(2)There is asymmetrical tail dependence between international stock markets,and the bottom tail dependence is generally higher than the upper tail dependence.(3)The average value of external tail dependence in-mature markets is relatively high,while that is low in emerging markets,indicating that the financial markets of developed countries still dominate the international financial markets.This paper focuses on empirical research.Compared with previous studies,the research in this paper is more systematic and comprehensive.This paper studies the relationship between the major global financial markets from the perspectives of yield-dependent structure,volatility spillover relationship,and extreme risk spillover relationship.Based on the Vine Copula method,this paper also describes the overall interdependent structure 'and risk conduction path between domestic and foreign financial markets.