A Study On The Risk Spillover Between Different Countries’ Stock Markets Based On Copula-CoVaR Theory

The European debt crisis and the 2008 US subprime mortgage crisis triggered a global financial crisis,and this illustrates that with the economic globalization,the risk in one country’s financial markets will spread rapidly to the whole world.Therefore,the study of risk spillover effects is essential.However,the traditional Va R method can only measure the risk situation of one market independently,often underestimating the real level of risk,and can not effectively estimate the risk spillover effect between different markets.This paper use Co Va R(Conditional Value-at-risk)method to capture the risk spillover effects between stock markets in different countries and regions.Here we construct two models,GHYP-Copula-Co Va R and GARCH-Copula-Co Va R,to study the risk spillover effect of one stock market in its distress for another stock market.The GHYP-Copula-Co Va R model first uses the generalized hyperbolic distribution to fit the marginal distribution of the yield time series,for the reason that the generalized hyperbolic distribution can better fit peak,thick tail and skewness of financial return series than normal distribution.Then the Copula function are applied to depicting the dependency and joint distribution of the two financial markets.Finally,based on the first two steps,we measure Co Va R to suduy the risk spillover effect.The GARCH-Copula-Co Va R uses the same approach,but we use the GARCH model to fit the marginal distribution.This paper chooses the stock markets of the United States,Japan and Hong Kong,China as the research object,and analyzes the risk spillover effects of the three stock markets on the Chinese stock market.Specifically,the US subprime mortgage crisis is used as a time node to study the change of risk spillover effect during different risk periods.Finally,the results show that the three major stock markets have a significant positive risk spillover effect on China’s stock market,but the strength of the risk spillover effect is quite different.On the other hand,this paper chooses China’s A-share and B-share market as the object of study,and draws the conclusion: the risk spillover effect of B-share market to A-share market is relatively weaker than that of A-share market.