Research On Systemic Financial Risk Of China’s Stock Market Based On The Dynamic Correlations Of Industry Sectors

At present,China’s capital markets are gradually developing to multiple levels,the cooperative business among all walks of life is gradually increasing,the degree of liberalization of the whole market is becoming higher and higher,and mixed businesses are emerging one after another.Under such a trend,if there is a crisis in an institution or industry in the market system,it will quickly spread to the cooperative institutions and endanger the stock market.More seriously,the real economy will also be dragged down,eventually causing damage to China’s economy.Facing the complex economic structure and stock market,it is of great significance to study how to use scientific means to effectively prevent and control systemic financial risks.This paper takes the daily returns of 28 Shenwan first class industry indices in China from January 4,2006 to June 16,2021 as the research object,and uses DCC-MVGARCH model to estimate the correlation coefficient of dynamic conditions among industries.On this basis,DCC-MVGARCH-CoVaR model is used to calculate the systematic risk spillover among industries in China’s stock market,and BG algorithm is used to identify the mutation point of the average correlation coefficient between industries and the anomaly point of the average conditional value at risk.Lastly,with the help of complex networks,the volatility linkage network and risk contagion network on key dates are constructed by using the plane maximum filter graph algorithm,the systematic importance of various industries in the two networks is investigated,and the correlation degree and risk spillover level between industries are analyzed.Through empirical research,this paper draws the following conclusions.First,the average value of inter industry correlation coefficient and the average level of inter industry systemic risk spillover will increase significantly in major events such as the financial crisis.In several crisis periods,the average level of systemic risk spillovers across the industry from strong to weak is 2015,2007-2009,2020,2018 and 2011.Second,China’s inter industry risk infection network has obvious time-varying characteristics,and the systematic importance of various industries under different major events also shows a dynamic trend.Banking and non banking financial industries have always been systemically important industries in various periods,and the importance of other industries has changed.For example,agriculture,forestry,animal husbandry,fishery and mining industries were systemically important industries from 2007 to 2008,while computers,medicine and biology were in 2015 and 2018,which also reflects the transformation of China’s industries.Third,there are obvious differences in the dynamic correlation between various industries and the banking industry,among which the correlation between banks and non bank finance and real estate is the highest.There are differences in risk spillover effects between physical industries and banking industry.Real estate,chemical industry and other industries have significant risk spillover effects on banking industry.The bank’s risk feedback effect on non bank finance,real estate and other industries is significant.Fourth,use five network centric indicators to judge the volatility linkage network and use the connectivity and connectivity to identify the important nodes of the risk contagion network.It is found that the bank and the food and beverage industry are systemically important industries shared by the volatility linkage network and the risk contagion network.These industries are too important to fail,so they should be closely monitored to prevent systemic financial risks.Fifth,from the perspective of the direction of risk contagion,the important industries of risk output are physical industries,such as food and beverage,electronics,chemical industry and other industries,and they all belong to upstream industries.The important industries of risk acceptance are banking,non bank finance,computer and other industries,which all belong to the middle and downstream industries.This paper puts forward the following policy suggestions.To prevent systemic financial risks,we need to pay close attention to industries with high systemic importance and conduct differentiated supervision according to the degree of systemic importance.The regulatory authorities should be based on the overall perspective,face up to the role of finance,pay attention to the contribution of the real industry to systemic risks,identify the risk source industry,make forward-looking regulation,and cut off the risk transmission path at the initial stage of risk transmission.