Research On Co-movement Effect And Risk Spillover In Financial Markets

General Secretary Xi Jinping repeatedly stressed that we should put the prevention of financial risks in a more important position in order to build a new development pattern.The opening-up of China's financial market has been strengthened,and the market-oriented reform has been effectively promoted,which has actively promoted the sustainable innovation and development of financial markets and interconnection between markets.The risk impact of the global financial crisis on global financial markets poses a threat to the stability of financial system.China's economy has entered a stage of high-quality development,the financial market structure has been further optimized,and the linkage effect between financial markets has been strengthened.Risk fluctuations in a single financial market tend to spread rapidly to entire financial system,and risks will erupt intensively and eventually trigger systemic financial risks.Therefore,in order to promot the high-quality development of financial industry,the key point is to prevent financial risk.As an important part of China's financial markets,stock market,foreign exchange market and bond market occupy the high market share and are large in scale,they are the key areas of financial risk transmission and financial crisis outbreak.The linkage relations and risk transmission between different financial markets are related to long-term and stable development of financial markets.Clarifying the correlation structure between financial markets and effectively measuring market risk are important prerequisites for promoting the healthy development of multi-level capital markets and preventing financial market risk infection.At present,scholars at home and abroad focus on the dependence of financial markets and hot issues of risk measurement.However,most existing studies focus on two markets and use a single index to analyze the relationship between financial markets.This thesis applies different types of variables comprehensively to conduct the profound study on the linkage relationship and risk contagion among multiple financial markets.In order to more effectively analyze and measure the linkage mechanism of financial markets and extreme risk transmission across the markets,based on the relevant domestic and foreign research conclusions,the theory of financial asset price fluctuation and interpretation of Chinese financial markets' development,this thesis deeply studies the relationship between China's financial markets from different levels,such as the overall characteristics and internal segmentation.Taking stock market,foreign exchange market and bond market as the main research objects,this thesis selects variables representing the overall trend of each financial market,further subdivides each financial market,and selects the variables representing the specific characteristics of each subdivided market.Firstly,this thesis analyzes the tail linkage effect between different financial markets from the perspective of overall and specific operation of financial markets.Secondly,from the perspective of the overall operation of financial markets,this thesis focuses on the dynamic correlation and volatility spillover effect among stock market,foreign exchange market and bond market,and understands the degree of market dynamic correlation and volatility transmission process.Then,based on the tail dependence between markets,considering the extreme fluctuations in financial markets,this thesis measures the upside risk and downside risk of financial markets,and study the risk spillovers in extreme cases.Finally,this thesis synthetically measures China's systemic financial risk,build different complex network models,and comprehensively analyze the overall linkage relationship and risk transmission mechanism between China's financial markets.This thesis makes research from the following aspects:First,to analyze the tail linkage effects of financial markets.By constructing the mixed Copula model,this thesis explores the asymmetric tail dependence structure among China's stock market,foreign exchange market and bond market,estimates the parameters of marginal distribution and joint distribution models of different returns series,describes the upper tail correlation and lower tail correlation between variables,and depicts the linkage effects of financial markets.The results are as followings:Firstly,there is a significant asymmetric tail correlation between financial markets.From the overall operation aspect,there is a strong upper tail correlation between stock market,foreign exchange market and bond market.Compared with stock market,bond market is greatly affected by the sharp rise of exchange rate level.Secondly,from the perspective of financial segment markets operating,there are some differences in the tail correlation and correlation direction between segment markets and overall markets,which are mainly reflected in the positive lower tail correlation between Shanghai stock market and onshore foreign exchange market,offshore foreign exchange market and inter-bank bond market,as well as in the negative tail correlation between Shenzhen stock market and offshore foreign exchange market,Shanghai stock market and inter-bank bond market,onshore foreign exchange market and exchange bond market.Second,to analyze the volatility spillover effects of financial markets.This thesis uses DCC-MVGARCH model and BEKK-MGARCH model to analyze the dynamic correlation and volatility spillover effects among China's stock market,foreign exchange market and bond market.The results show that,firstly,the dynamic correlations between stock market,foreign exchange market and bond market show obvious persistence;the dynamic correlation coefficient between stock market and foreign exchange market fluctuates greatly,showing an upward trend and obvious time variability;there is a weak dynamic correlation between stock market and bond market as a whole;the fluctuation between foreign exchange market and bond market has strong linkage and transmission,and the correlation coefficients between them change from positive to negative in a short time.Secondly,volatility transmission among stock market,foreign exchange market and bond market shows aggregation and persistence;there are significantly bidirectional volatility spillover effects between stock market and foreign exchange market,stock market and bond market,but there is unidirectional volatility spillover effect from foreign exchange market to bond market.Third,to measure the extreme risk contagion effects of financial markets.This thesis constructs TGARCH-Copula-CoVaR model to describe the tail correlation structures between financial risk elements,and to measure the extreme upward risk and downward risk spillover effects of financial markets.The results are as followings:Firstly,the risk correlation between stock market and foreign exchange market is most affected by the extreme price fluctuation,while the risk correlation between stock market and bond market is least affected by the extreme price fluctuation.There are some differences in the tail correlation structures between different variables.Next,there are bidirectional and asymmetric extreme risk spillovers between stock market,foreign exchange market and bond market.There are differences in the impact of upside risk and downside risk spillover effects in various financial markets.For stock market,when other markets fluctuate abnormally,the downside risk spillover is greater than upside risk.For foreign exchange market,when the market crisis occurs,the downside risk spillover from stock market to foreign exchange market is greater than the upside risk,while the upside risk from bond market to foreign exchange market is greater than the downside risk.For bond market,when other markets are in violent turmoil,the upside risk of bond market is greater than the downside risk.Fourth,test of risk transmission relationship in financial market network.The thesis constructs static complex network model and dynamic complex network model respectively.From the perspective of static trend and dynamic fluctuation,we comprehensively analyze the transmission channels and overall characteristics of stock market,foreign exchange market and bond market risks in the financial network by using different complex network models.The results are as followings:Firstly,by constructing the static complex network model,it is found that the static financial network presents typical small world characteristics with small average path length and large clustering coefficient,which reflects that China's financial network presents dense relevance and risk can be transmitted rapidly in the financial network which makes risk more destructive and persistent.In addition,stock market is at the core of financial network and has significant systematic importance in financial network.Secondly,by constructing the dynamic complex network model,it is found that the clustering coefficients of China's financial network gradually increase,and the connection strength between financial markets becomes closer,which improves the possibility of financial risk transmission.In different periods,the risk transmission relationship among China's stock market,foreign exchange market and bond market has obvious time variability,and the risk infection of a single financial market to other markets presents significant dynamic characteristics.From a new perspective of overall operation and specific operation of each financial market,the above researches depict linkage effects and volatility spillovers between China's financial markets from different dimensions as well as describe the risk transmission characteristics between markets under extreme volatility and identify financial risks.The relevant research conclusions provide reference value for the formulation and implementation of policies to improve financial supervision system and prevent financial risks,and have important practical significance for realizing China's objectives of steadily dealing with risks in financial fields.