Research On The Correlations And Risk Spill Over Between Listed Bank In Our Country

With the accelerating pace of financial globalization and innovation, thefinancial institutions’ links become more closely. In China, the banking industry is thecore of the financial system. Through business dealings and other interconnectednessbehavior, the links between banks have become much closer. How to depict thecorrelation between the banks and estimate the risk spillover effects are a problem thatcannot be ignored.Copula theory has many advantages in the analysis of the correlation structurebetween the variables. It can characterize the non-liner, non-symmetrical tailcorrelation between variables and the variable structure Copula can accurately find thepoint of change of the correlation structure between variables, providing a basis tostudy risk spillover effects. This paper selects10banks from China’s listed banks as asample to analysis empirically the correlation between banks in particular thetime-varying correlation and risk spillover effects. In the process of empirical research,firstly, as the fat tail phenomena are prevalent in financial time series,the result showthat the GARCH(1,1)-t model is appropriate to fit the edge distribution of the returnseries of China’s listed banks. Secondly, this paper made a detailed study oncorrelation between China’s listed banks, and the results show that the correlationbetween China’s listed banks is strong, changing constantly but around a fixed valuefluctuations and the trend is very similar. Thirdly, based on the time-varying research,this paper made a change point test on the listed banks’ correlation structure under theZ-test, and the result shows that most of the banks’ correlation structure has changedon September18,2008. Therefore, this paper study the changes of China’sstate-owned banks’ risk spillover effects to joint-stock commercial banks before andafter the American crisis choosing September18,2008as the cut-off point based onCoVaR and the quantile regression technique. The result show that the risk spillovereffects of China’s state-owned banks to the most of the joint-stock commercial banksincreased, especially to Minsheng Bank, the risk spillover effects is more than40%,under the case of q is equal0.05At present, the regulatory authorities insist that not only the scale factors of banksbut also the interrelated nature of the inter-bank and the risk spillover effects when theindividual bank are in trouble must be considered in determining the systemic important banks.In this paper,the study on the correlation of the China’s listed banksand estimate of risk spillover effects between banks can help the financial regulatoryauthorities capture the intensity of the risk spillover between banks timely and thenmonitor and manage the institution which have high risk spillover effects to others soas to maintain the stability of the financial markets. At the same time, the study canalso provide the basis for micro-financial entities to make investment analysis andportfolios.