Research On The Risk Contagion Effect Of Asian Banking Stock Market Based On Copula-GARCH Model

Since the financial crisis in 2008,the banking industry in the world has suffered a serious risk impact.The risk spread quickly and had a wide impact.Inter-bank risk contagion is the key to causing systemic risk outbreaks.Once the outbreak of systemic risk will cause a country or even the global financial market turmoil.Correctly identifying the crisis effectively measures risk plays an important role in preventing bank crises.Over the past 20 years,strong support from financial institutions has made Asia the fastest growing region in the world.The banking industry is the foundation of financial institutions.One-fourth of the world’s 29 systemically important banks(GSIBs)are from Asia,and their economic expansion is often accompanied by the rapid development of international and regional economic and financial integration.While the growing inter-regional and global financial integration has led to an increase in the degree of interdependence among banking sectors in the region,and the risk transfer effect has intensified.Based on this,this paper uses the Asian banking industry as the research object to construct the Copula-GARCH model to explore the contagious effects of systemic risks in various regions of the banking industry.Through studying the interdependent structure of banking in different Asian economies,the threat of systemic risk can be resolved,and also provides effective policy recommendations for the prevention of risk contagion in neighboring economies in various Asian regions,especially the Chinese banking industry.The main conclusions of this paper are as follows:(1)The interdependence parameters between China and Asian banks were positively correlated In the period of before,middle and after the crisis,and the Asian banking financial market was positively linked.(2)The dependence parameter has risen sharply during the crisis,indicating that the financial crisis has increased the interdependence of the banking industry.The banking industry and the banking stock price index may simultaneously fall in China and various regions of Asia.(3)The tail stream of the Chinese mainland and Hong Kong banking industry is the most dependent,indicating that the linkage relationship is the closest.When the crisis occurs,it is most vulnerable to the risk spillover of the banking industry in Hong Kong.(4)The trend of between any two,cross-sectional and overall market of Asian banking industry in the three stages before,during and after the crisis is consistent.There was a sharp rise and fall in the tail dependence before and after the crisis.The tail dependence of the Asian banking industry was the greatest when the crisis occurred,and slightly decreased after the crisis,but the tail was more dependent than before the crisis,indicating that banks in various Asian regions have increased in recent years,indicting that in recent years,the banking financial market in Asia has developed steadily,and the international cooperation and exchanges have increased and business contacts have become closer.(5)The tail dependence of Hong Kong,Singapore,Japan and South Korea in the cross-sectional market of Asian banks is larger than that in the rest of Asia,showing that the banking industry in all regions of Asia is more vulnerable to the risk of developed markets in Asia.(6)The interdependence of developed markets in Asian banking is always greater than that of emerging markets,indicating that the risk of infection among developed markets is the fastest when the crisis occurs.Based on the above conclusions,this paper finds that risk contagion has no significant transnational heterogeneity in the Asian region,and the banking financial market in the Asian region has not yet reached high economic integration.The simultaneous linkage trend and low correlation of the Asian banking industry can reduce portfolio risk.In an extreme financial market downturn,investors can benefit from a variety of combinations of stocks issued by Asian banks.At the same time,strengthening the regulation of banking in Asian countries and regions is crucial.The increase in interdependence during the crisis indicates that more attention needs to be paid to individual banks in order to avoid potential risk spillovers in financial market extremes.In addition,in order to prevent and reduce the impact of the financial crisis on China’s banking market,it is necessary to improve macroeconomic regulation and control,prudently and orderly open domestic financial markets,strengthen international exchanges and cooperation.While actively participating in international activities and promoting the integration of the domestic financial system with the international standards,the independence of the domestic banking financial system should be maintained so as to reduce the dependence on foreign financial markets.