Research On The Interdependence Structure And Risk Spillover Effect Between Cryptocurrencies And Chinese Financial Asset

At present,financial globalization and integration are becoming more mature,international capital flows are frequent,the linkage effect of financial assets is strong,and abnormal fluctuations in local financial markets can easily lead to systemic financial risks.At this stage,China still regards the prevention of systemic financial risks as the top priority in the financial field,and the Central Economic Work Conference emphasizes the bottom line of preventing systemic financial risks.At present,cryptocurrency,an emerging financial asset,has drawn much attention from investors and financial regulators.Due to the high returns of cryptocurrency,which has attracted more investors in the mainland of China.China’s cryptocurrency transactions have been very active,and the cross-market capital flow has brought certain impacts and great security risks to China’s financial market,therefore,China has implemented strict regulatory policies on cryptocurrency.In view of this,it is of great theoretical and practical significance to study the interdependence structure and risk spillover of cryptocurrency assets and China’s financial assets for preventing systemic financial risks,ensuring the stability of financial order,and promoting the development of the digital economy.This paper takes cryptocurrencies and China’s financial assets as the research objects,and conducts research around the context of “cross-market interdependence structure,risk spillover,and extreme risk spillover”.Based on the typical factual characteristics of cryptocurrency and Chinn’s financial assets,this paper studies the interdependence structure and asymmetric interdependence structure between cryptocurrency and China’s financial assets.Then,we focus on empirical research on the risk spillover and extreme risk spillover effects between cryptocurrency and China’s financial assets from different perspectives,appropriate policy recommendations are further proposed.The main research work of this paper is as follows:Firstly,we studied the interdependence structure of cryptocurrency and China’s financial assets.The interdependence structure between cryptocurrency and China’s financial assets is mainly studied based on the multifractal detrended cross-correlation analysis method,and the asymmetric interdependence structure is studied based on the multifractal asymmetric detrended cross-correlation analysis method.At the same time,the nonlinear correlation between cryptocurrency and China’s financial assets is studied using the asymmetric DCCA correlation coefficient method.When studying the interdependence structure,this paper also considers the impact of China’s “shutdown” policy.The multifractal asymmetric detrended partial cross-correlation analysis method proposed in this paper is used to study the intrinsic interdependence structure of cryptocurrency and China’s financial assets after removing the influence of the S&P 500 index and the US economic uncertainty.Our results demonstrate that the cross-correlation between cryptocurrency and China’s financial assets has asymmetric multifractal characteristics.The long memory of small fluctuations is strong,and the antipersistence of large fluctuations is strong.The cross-correlation between different types of cryptocurrencies and China’s financial assets is different.The nonlinear correlation between the cryptocurrency index and China’s stock market and gold assets is relatively strong.The S&P500 index and US economic uncertainty have a significant impact on the intrinsic interdependence structure between cryptocurrency and China’s financial assets.The interdependence structure between cryptocurrency and China’s stock market is significantly different from other international stock markets.The long-term memory between Cryptocurrency and the CNY/USD exchange rate is stronger than that between cryptocurrency and international exchange rate assets.Secondly,we studied the risk spillovers between cryptocurrency and Chinese financial assets.This paper studies the risk transmission direction between cryptocurrency and China’s financial assets through the time delay DCCA method.Based on the direction of risk transmission,the mean spillover,volatility spillover and asymmetric volatility spillover effects between cryptocurrency and China’s financial assets are studied by using the time-varying parameter vector autoregressive spillover index model.Furthermore,we study the long-term,medium-term and short-term mean spillover and volatility spillover effects between cryptocurrency and China’s financial assets through frequency domain decomposition.We also embed a generalized dynamic factor model into the time-varying parameter vector autoregressive model to investigate the volatility spillover effects of common and idiosyncratic components between cryptocurrency and China’s financial assets.We further study the factors that affect the spillover effect.Empirical analysis confirms that the risk spillover effect between cryptocurrency and China’s financial assets is weak,and the spillover effect on China’s exchange rate assets,gold and bond assets is strong on the whole.The spillover of cryptocurrency to China’s financial assets under negative volatility is stronger than that of positive volatility.Regardless of mean or volatility spillovers,short-term spillovers between cryptocurrency and China’s financial assets dominate.The volatility spillover under the common component between cryptocurrency and China’s financial assets is much higher than that under the idiosyncratic component.The implementation of China’s “shutdown” policy cannot fundamentally prevent the occurrence of risk spillover.The impact of long memory characteristics on the risk spillover effect between cryptocurrency and China’s financial assets is not strong.The liquidity of cryptocurrency,the uncertainty of the US economy,and the S&P500 index have a significant impact on the risk spillover of cryptocurrency and China’s financial assets.The risk spillover of Cryptocurrency to China’s stock market is less than that to other international stock markets.The risk spillover of cryptocurrency to Chinese exchange rate assets is greater than that to international exchange rate assets.Finally,we studied the extreme risk spillovers between cryptocurrency and China’s financial assets.The tail risk transmission between cryptocurrency and China’s financial assets is analyzed according to the multi-conditional value-at-risk model.Under the quantile spillover index model,this paper studies the extreme upward and downward tail risk spillover effects of cryptocurrency and China’s financial assets.The extreme risk spillover during the bull market,bear market and COVID-19 period was studied.The empirical results show that at the significance level of 5%,the tail risk spillover of cryptocurrency to China’s Hang Seng Index,China Securities Bond Index,China Securities Metal Index,Shanghai Gold,and Real Estate Index is very significant.In the extreme downward and upward situations,the risk spillover of cryptocurrency and China’s financial assets is far beyond the intermediate normal state,and the risk spillover during the extreme upward period is slightly stronger.During the bull market,the risk spillover between cryptocurrency and China’s financial assets is much higher than those during the bear market.At the beginning of the COVID-19 epidemic,the spillover of cryptocurrency to China’s financial assets was significant.