Study On The Risk Spillover Effect Between China's Insurance Market And Banking Market

Since the event of American International Group,the systemic risk problems of insurance industry have attracted more and more attention,risks leading by insurance industry or other industries that infected to insurance companies are increasing.In terms of our country,the risk accumulation and overflow level in insurance are also rising,as two important component part of the financial markets,there are many connections between the insurance market and banking market in organizations,products and markets,the risk contagion effects are also increasing.Therefore,in this paper,we research the risk spillover effect between our country's insurance and banking market from theoretical and empirical aspects.In this paper's theoretical analysis part,we analyze the risk connection and the path of risk contagion between insurance and banking market,we think that there are many direct and indirect contactions in business,institutions and capital market,besides,the correlation degree is deepening;Because of the risk characteristics of their own,they are both likely to become a risk contagion source,and transmit the risk mainly through the capital market's "second-order effect".In this paper's empirical analysis part,we selected three listed Chinese insurance companies(China Ping An,China Life and CPIC)and 12 listed banks as our sample,the stock's closing price data is from January 4,2008 to December 31,2015,and then we calculated the insurance market and banking market's stock yield sequence respectively,researched the spillover effects of the two markets based on this data sequence.First,we measured two markets' volatility using a GARCH model,the results show that the sequence of yield of the two markets are affected by the prophase yields,and there is risk exposure problem.Second,we measured the risk spillover effect between the two markets,and results indicate that the banking market has a short but weak mean spillover effect on insurance market,but there is no same effect conversely;what's more,there is obviously bidirectional volatility spillover effect between insurance market and banking market.Third,the volatility between the two markets is highly related,and the infection of risk is mainly through the capital market,the path of the risk contagion may be nonlinear.Finally,we proposed some supervision suggestions of the controling of insurance market according to NTNI businesses and pro-cyclicality of insurance;we also put forward some research prospects based on our research.