Industry Short-term Aggregation Effect And Long-term Diffusion Path Research Based On Sovereign Rating Downgrade

At the end of 2009, three major international rating agencies downgraded Greece’s sovereign credit rating, which caused the Greek debt crisis. And then the rating of Italy, Spain, Portugal and Ireland was also been degraded. Greece’s debt evolved into the European debt crisis. The impact of the debt crisis effect not only brings transmission between the regional, industries, and also causes investment transfer behavior of investors. Investors that influenced by sovereign credit rating downgrade negative news, usually are overreaction for a particular industry in a short period of time the negative adjustment status.They quickly withdraw money, and transfer to other industries. At the same time due to the risk transmission mechanism between the industry makes the investment transfer phenomenon will be intensified, and during the crisis, some industries have been hit strength is most obvious, the associated industry, most gathered between industries which form a short-term phenomenon. But as the regulation of financial markets, for medium and long-term investment transfer between industries will gradually tend to be more rational, the money will be from previous clustering gradually transferred to other industries, the most obvious industry under the action of the diffusion path, which will form a new equilibrium. Based on short-term industry clustering between sorting, to investors’ asset allocation, we can provide some references for the risk and return, and also provide theoretical basis for government decision-making. And long-term diffusion path analysis can help us clearly find the weak links and the existing problems in the development of economy to make government policy makers provide support for key industries, and control the crisis spread status, reduce the risk of shock, maintain the stability of the economy.We take Greece’s sovereign credit rating downgrade events as the economic variables, and use downgrade the European stock market volatility industry price gains and dynamic impact as the breakthrough point, analyze the different economic impact on the entire sample interval industries, couple with the correlation analysis between industry, using the SVAR-BEKK and other models to find the largest correlation most cluster effect industry and analyze long-term diffusion process.First we systematically analyze the industry infection, competition, and synergistic effect under European crisis from the angles of investor behavior and economic fluctuation. And then we analyze the whole event evolution and influence triggered by Greece downgrade. Secondly, we take the Greek downgrade as a starting point, and the dynamic impact of stock price returns and volatility of European industries as a breakthrough point, combined with the correlation analysis between industries, using a variety of econometric models to research the European debt crisis impact on the stock market in short-term concentration and long-term diffusion path of different industries. The empirical results show that in the event window, finance, service industry stock index hit first, then the stock of the materials, consumer goods, utilities and other industries index also started to yield abnormal fluctuations, which began to spread in every industry. At the same time, according to the characteristics of the volatility the whole samples can be divided into stage aggregation and diffusion.Secondly, we analyze the stock index returns data in the first sample period, and use the SVAR-BEKK model to find the most obvious and concentration industry from industry price spillover effect and volatility spillover effect these two angles. The result shows that the financial, industrial, material the three industries in the position of the center node, are most vulnerable to the influence of other industry early or the current share price movements, its convergence is most obvious.Thirdly, in view of the above analysis results, we analyze the industry stock index returns data in the second sample period, by using the impulse response function, BEKK model to make empirical analysis in one-way and two-way transmission aspects. Through the analysis of the financial, service industry first hit, and spread to the real economy, at the same time because the speeding up of the "industrialization", eventually forming industrial centered transmission path. Finally through the network space we find the best dynamic diffusion path among different industries and put forward corresponding policies to reduce the impact effect and suggestions for the long-term evolution process.