Application Of ?CoVaR In Measuring Tail Dependence Between Mainland's And HongKong's Capital Market

China is opening wider to the world,and the interconnection between our financial markets and that of the world is an important issue.China's capital market has been gradually opened to the world market by means of the encirclement ports of Hong Kong.The opening of Shanghai-Hong Kong Stock Connect program and Shenzhen-Hong Kong Stock Connect program will gradually deepen the connection between the domestic capital market and the world market.The increase in the degree of external connection is also accompanied by the increase in the factors affecting the domestic market,which means that the risk management concepts and measures for the Shanghai composite index and Shenzhen component index will be changed and adjusted accordingly.In this context,it is of great significance to study the risk situation and changes before and after the opening of Shanghai-Hong Kong Stock Connect program and Shenzhen-Hong Kong Stock Connect program.This paper mainly studies the tail dependence of hang seng component index,Shanghai composite index and Shenzhen component index after the launch of Shanghai-Hong Kong stock connect and Shenzhen-Hong Kong stock connect.The paper adopts a new simplified risk measure proposed by Adrian and Brunnermeier(2016,AER),i.e.,?CoVaR,which can effectively capture the characteristics of tail risk.According to the respective properties of hang seng index,Shanghai composite index and shenzhen component index,different indicators are selected as state variables for them,and the conditional quantile regression is applied to estimate the corresponding value,?CoVaR.Our study focuses on the time series dimension.Empirical results show that the state variable selected in this paper,such as real estate excess yield,index volatility,M2 growth rate,short-term interest rate spread,change in RMB exchange rate has a significant explanatory ability to ACoVaR.Conditional risk measurement of time series dimension leads to the conclusion that after the opening of Shanghai-Hong Kong Stock Connect program and Shenzhen-Hong Kong Stock Connect program,the tail dependency between respectively Hang seng index and Shanghai composite index and Shenzhen component index has been reinforced especially after Shenzhen-Hong Kong Stock Connect program;the relative stability of Hang seng index can,when the risky event only occurs responding to the two inland index,reduce the overall risk of the system,and in the case that Shanghai composite index and Shenzhen component index have not been accompanied with independent risk merely for themselves,with the strengthening of degree of connection,spillover of the risk of the hang seng index to two inland index increases,this trend is especially significant in the wake of the opening of Shanghai-Hong Kong Stock Connect program and Shenzhen-Hong Kong Stock Connect program.The out-of-sample results show that ?CoVaR has good predictive ability for out-of-sample of systemic risk;on the other hand,after the opening of Shanghai-Shenzhen-Hong Kong Stock Connect,the Shanghai Composite Index is subject to greater systemic risk.The results show that the ?CoVaR method can better capture the changes in the risk dependence between the inland market and the Hong Kong market.