On The Market Risk Connectivity From Different Industries Based On CoVaR Method

The industrial structure adjustment is an important subject of economic development all over the world. With the China’s rapid development of economy, all kinds of unreasonable conditions which exist in the industrial structure are standing out gradually. The proportion of substantial economy is too small, the virtual economy such as the financial and real estate expanded rapidly with the overcapacity in relevant industries, serious repeated constructions and other issues also exist. If the adjustment of industrial structure is not carried out promptly and effectively, it will not only cause serious waste of resources, but also be an obstacle to the orderly development of the entire industry economy.The financial crisis of2007had influenced Chinese economy significantly. The crisis forced the United States and other Western developed countries to improve the savings rate, strengthen the trade protection, recall part of industrial production and develop new energy and other emerging industries, which makes our country more difficult to get added value from the international industrial division of labor, and the development of related industries suffer a terrible beating. Based on the above background, from the perspective of industrial risk correlation, this paper focuses on investigating the changes of market risk connectivity between industries before and after crisis to provide a theoretical basis for rational adjustments of industrial structure in China.Firstly, for providing the basis for selecting samples and determining the research object, we do the statistical description of industrial distribution, industrial structure, industry scale and main products of companies listed on Shanghai and Shenzhen. This research based on the data of listed companies and two classification criteria "Industry Classification Guidelines" issued by China Securities Regulatory Commission and "Three Industry Regulations" proposed by the National Bureau of Statistics.Secondly, according to the Industry Classification Standard proposed by China Securities Regulatory Commission, this article does the empirical investigation on the changes of the market risk association of Shanghai A-share industries before and after subprime crisis with the method of CoVaR by using the financial data of listed company and a range of macro-state variables. The results suggest that the risk connectivity before and after crisis of listed companies change significantly. On one hand, a series of industrial structure adjustment policies made by the government after the crisis has played a positive role in the development of market economy. On the other hand, the risk connectivity of the listed companies in related industries are still high.Particularly, by selecting the CSRC industry index and the A-share market index, we construct a consolidation model of R-CoVaR to do an empirical research on the risk connectivity of manufacturing, financial services, real estate and the A-share market over time with the basic principles of CoVaR as well as the idea of "rolling window". The empirical results show that:First, the level of risk connectivity of manufacturing, financial services and real estate was significantly enhanced after the outbreak of the crisis. Second, the degree of industrial risk connectivity and that between industry and market is asymmetric. Third, the government plays an important role in controlling the risk level of financial market and there is a certain lag effect on macro-economic regulation measures.At last, according to the empirical results, we put forward proposals for related industrial structure adjustment.