Research On Downcrash Risk Of Stock Price And It's Effects Upon Investment Performance

The crashes in stock market are regular visitors in capital market,which brought massive losses to investors,destroyed the equilibrium of capital market and even seriously damage the country's economic system.The promotion of globalization shortened the distances among multinational capital markets.A small-scale fluctuation in stock market may possibly trigger a butterfly effect and quickly spread over into global capital markets.The 2020 Central Economic Work Conference confirmed to prevent and control financial risks while maintaining sustainable and healthy economic development.The orderly operation of capital market is the premise for high-quality economic growth,which is an essential guarantee to promote investors' confidence and boost the healthy operation of real economy and listed companies.It is necessary to investigate the influence factors of crash risks in stock markets and its impacts on stocks' returns of listed companies,which provides references for regulators,risk managers and investors to prevent financial risks and lessen investment losses.Based on macro and micro investigation of mechanism of the crash risks in stock markets,the theoretical basis to construct the crash risk indicators of stock prices is introduced given the extreme value dependency theory and Clayton-Copula function.Next three indices,including the crash risk indicator in stock prices,negative skew coefficient and volatility ratio,are constructed from different perspectives to measure the crash risks in stock prices.Considering the company's valuation,stock trading,solvency,risk analysis and consumers' confidence,twelve control variables are selected to establish a two-way fixed-effect panel regression model to empirically test the predictability of three indicators of crash risks on stock returns.Empirical regression exhibits positive correlations between three indicators of crash risks in stock prices and the expected returns of stocks,that is,when crash risks in stock prices gets greater,the investors will pursuit higher risk compensation.The non-zero estimator of parameter theta in Clayton-Copula function estimated based on sample data shows a significant tail correlation between stock market returns and individual stock returns,which indicates the aggravated crash risks for individual stocks along with higher crash risks in stock market.Three samples are selected to test the robustness of panel data model.Their consistent performance in three time periods verifies the rationality of three indices of crash risks for stock prices and control variables as well as the robustness of regression model.For the first-order lagged data used in three crash risks indices and control variables,this regression model provides the risk indication for regulators and risk managers to monitor the operation of capital markets,it also helps the investors predict the future stock returns and instruct their investment decisions.