A Study On Risk Contagion Effect Between Chinese Stock Market And Foreign Stock Markets

Economic globalization makes economic links become closer among countries, but it also may lead to wider transmission of economic risks, so study economic risk contagion effects has important theoretical and practical significance. This paper aims to analyze the risk contagion effects between China’s stock market and foreign stock markets. Because there exist significant differences of risk characteristics of stock markets between bullish period and bearish period, in this paper, two typical periods are treated as bullish sample period and bearish sample period respectively. Moreover, risk contagion effects and its differences are analyzed in two periods. Besides, two methods are used to measure the risk of stock markets in this paper:firstly, conditional volatility is used to measure the volatility risk of stock markets; Secondly, Value at Risk (VaR) is used to measure the risk of stock markets. Furthermore, Granger-causality test method is used to analyze the contagion effects of risk in bullish period and bearish period, at the same time, the paper makes analyze of the differences of risk contagion effects between these two periods with comparison analyze. The conclusions of this paper are listed as following:(1) There are significant differences between the risk contagion effects of bullish period and bearish period, the risk contagion effects among foreign stock markets increase from bullish period to bearish period, but decrease between China’s stock market and foreign stock markets.(2) Both in the bullish period and bearish period, the risk contagion effects between China’s stock market and others are weak, only some risk contagion effects between Shanghai stock market and Tokyo stock market. In bullish period, the risk of China’s stock market will transmit to Tokyo stock market, while only VaR will transmit to Tokyo’s and transmit to others indirectly in bearish period.(3) In bearish period, the risk of foreign stock markets doesn’t transmit to China, so the risk of China’s stock market is impacted by others weakly. It suggests that the risk of China’s stock market mainly is influenced by market environment or economic policies of our own country.