A Study Of Systemic Risk In Chinas’ Listed Banks Based On Time-series Analysis

The global financial crisis since2008has drawn worldwide attention toexploring systemic risk. As there is potential systemic risk in China andcorresponding prevention and supervision are still at the initial stage, special attentionneeds to be paid to systemic risk in China. Within this background, the thesis, adopting time series analysis of data from capital market, makes a dynamic study ofthe macro-prudential monitoring of systemic risk in China’s listed banks.This thesis regards commercial bank listing and the evolution of the financialcrisis as landmark events and collects the data of the four periods—initial listingperiod (from fourth quarter of2003to second quarter of2006), massive listing period(from fourth quarter of2007to third quarter of2008), financial-crisis period (fromfourth quarter of2008to second quarter of2010) and post-financial-crisis period(from September of2010to the last trading day before Spring Festival of2013)—toexplore the multidimensional characteristics of systemic risk of the listed banks in themacro-prudential framework, including accumulation from time dimension,covibration (directionality and common risk factor) from cross-sectional dimensionand procyclicality (depth).Through calculating correlations, covariances and systemic-risk indices, thisthesis explores the temporal accumulation and indicates that the systemic risk of thelisted banks rose significantly with the increasing volume during massive listingperiod while the listed banks varied from each other in their systemic-risk level duringand after the financial-crisis period. The three indices are of high consistency andrelative complementarity.“Interconnectedness” and “common risk factor” are the twoways of allocating systemic risk or the two ways of the listed banks’ covibration.This thesis applies Granger Causality test to the directionality of the listed banks’interconectedness and indicates that the allocating mechanism has been formed andthe directionality is becoming more significant.This thesis applies VAR (Vector Auto Regression) Model and VarianceDecomposition to the allocation of common risk factor and demonstrates that common risk factor accounts much for the listed banks’ return volatility and theallocating mechanism was gradually formed from the massive listing period to thefinancial-crisis period.This thesis applies Cointegration Analysis and ECM (Error Correction Model) tothe procyclicality of the listed banks and macro-economy and of the listed banks andreal economy. Results show that during the financial crisis, the procyclicality wasreinforced and the systemic risk was deepening. Moreover, there is endogenousnegative feedback mechanism in the listed banks, which could stablize real economy.Moreover, the negative feedback mechanism is also procyclical in that it wasreinforced during the financial crisis but has been lessened after the financial crisis.This thesis has significant implications for policy making. Deinterconnectednessand dynamic monitoring of common risk factor should be the two priorities ofmacro-prudential supervision. Moreover, this thesis constructs multi-dimensional andmulti-sectional index system to monitor systemic risk of listed banks in the macro-prudential framework.Being compatible, foreseeing and interdisciplinary, the thesis represents boththeoretical and methodological breakthroughs, makes an extension of systemic riskand deepens the micro basis of macro prudence.