Research On The Dependence And Contagion Channels Between China’s Real Estate Industry And Banking Industry Based On Copula Function

As an important sector in the national financial system,the banking industry can provide financial support for promoting economic development and improve financing efficiency on the one hand,and on the other hand,it can also provide assistance for the effective implementation of national monetary policies.Therefore,the stable operation of the banking system is the foundation for a country’s long-term sound economic development.The "capital intensive" characteristic of the real estate industry makes the huge amount of funds required for the entire cycle from the beginning of development to the end of sales mostly come from bank credit loans.This long-term mutually beneficial symbiotic relationship binds the two industries tightly.Judging from historical lessons,several major international financial crises were caused by the collapse of the real estate bubble,which led to the collapse of the banking system and the entire financial system.For example,in the US subprime mortgage crisis in 2008,the real estate market collapsed and collateral prices were rapid.The decline caused several large banks to declare bankruptcy.The panic accompanied by the spread of the crisis in the financial system caused a major blow to many economies in the world.The impact of similar crises on the financial system is undoubtedly significant and continuous.In contrast to the situation of China’s real estate industry and banking industry,since the implementation of the housing market reform policy in 1998,the real estate industry has developed rapidly.The growth rate of real estate development funds in the 20 years from 2000 to 2019 was nearly 130%,from 599.76 billion yuan to 17860.90 billion yuan.Considering the characteristics of China’s credit system,the main source of financing for its real estate industry is still the banking system.By the end of 2019,China’s real estate RMB loan balance has reached 44.41 trillion yuan,accounting for 29%of all financial institutions’ RMB loan balance.Although it has declined compared with previous years,it is still relatively high.Moreover,China’s housing prices rose rapidly before the country implemented the property market control policies.Although the current housing market control policies have partially curbed the rapid rise in housing prices,the overall housing price level of the country is still at a high level,and various hidden economic risk factors are still worth focusing on attention.In previous studies on the interdependence between the banking industry and the real estate industry,most scholars focused on exploring the interdependence and contagion between the two,but ignored the research on the channels of infection.Based on the previous literature,this article attempts to first comprehensively explore the nonlinear,dynamic and time-varying complex relationship between China’s banking and real estate industry;then,examine the risk contagion relationship between the two industries during the financial crisis;From the perspective of behavioral finance,further research is conducted on the channels of infection in the two industries.This article first reviews the theories of bank risk management,liquidity correlation,and behavioral finance,and systematically combs the existing research;then,this article selects the real estate industry index and the banking industry index in the Shenwan first-level industry index as China’s real estate industry and as for the proxy variables of the banking industry,the daily data from January 4,2005 to December 28,2018 is selected as the research sample of this article.The ARMA-tGARCH model is used to construct the marginal distribution,and the static and dynamic Copula functions are used to analyze the data between the two industries.The static and dynamic dependencies are analyzed;then,an in-depth analysis of the tail correlation coefficient sequence under the time-varying Copula function is performed to test the contagion effects of the two industries during the financial crisis;the multivariate linear model and the quantile regression model are further used to analyze the financial correlation and behavioral finance explores the risk contagion channels of the two industries from two perspectives.The empirical research results show that:(1)China’s banking and real estate industries have a nonlinear,asymmetric,and dynamic time-varying complex interdependence;(2)Compared with the non-crisis period,there is the possibility of risk contagion in the two industries when the market goes down;(3)The results of contagion channels show that when the market performs poorly,the tightening of liquidity and investor pessimism will intensify risks spread between the two industries;finally,to summarize the research conclusions of this article,this research has theoretical and practical significance for investors to make risk-diversified investment decisions and policy makers to propose reasonable rescue measures during the crisis.