An Empirical Study On The Impact Of Asset Price Bubbles On Systemic Risk

Although there has not been a large-scale systemic crisis in China,high-risk financial events have occurred continuously in recent years.Such as Bao Shang Bank being taken over and Yongcheng Coal and Power Company defaulting on AAA bonds,which have caused regulators to attach great importance to the supervision of systemic risks.Just as the "14th Five-Year Plan" put forward one of the principles that economic and social development must follow: adhere to the system concept,focus on preventing and resolving major risks and challenges,improve the modern financial supervision system,and improve the financial risk prevention and early warning system.The measurement of systemic risk and analysis of its causes has become the top priority of current academic and regulatory research.No matter the tulip bubble in the early stage or the subprime mortgage crisis in 2008,like nearly all previous financial crises,there have been strong increases and reductions in asset prices,proving that the cyclical emergence of asset price bubbles does lead to systemic financial crises.Asset price bubbles are often accompanied by excessive speculation.When bubbles burst,a large number of loan defaults exacerbate liquidity runs and market panic.Bubbles are the main risk source of the financial crisis.This paper will analyze the determinants of systemic risk of Chinese financial institutions from the perspective of asset price bubbles and verify whether the bubbles can become an early warning signal of financial stability.First,on the basis of previous studies,the GASDF model can identify the starting point of the bubbles,which is selected to identify the stock market and real estate market bubbles,and explain the reasons for the formation of the bubbles according to the stage of China’s economic development and policy implementation.The study found that there were two significant bubbles in the stock market,corresponding to the first half of 2006 and the first half of 2015,both of which were related to investor expectations.There are four stages of the real estate bubbles,the first stage is related to the real estate marketization and the Chinese government’s support for real estate,the second stage is related to the government’s $4 trillion rescue plan after the 2008 crisis,and the last two are related to investor expectations.and the real estate bubbles in first-tier cities is ahead of second-and third-tier cities.Secondly,based on the DCC-GARCH-Co Va R model to measure the systemic risk of 33 listed financial institutions in China,and classify the institutions,the results show that the main source of systemic risk in China is the banking industry,and most of them are joint-stock banks.In addition,the study found that there is a negative correlation between capital and systemic risk,which is a barrier for financial institutions to resist external shocks.Then,the paper analyzes the relationship between stock market bubbles,real estate bubbles and systemic risk.The results show that the stock market bubbles can significantly increase the systemic risk of financial institutions,especially the banking industry,and the larger the scale,the more sufficient the capital and the lower the leverage,the stronger the ability to resist the systemic risk.Similarly,the real estate bubbles sand the real estate loan growth rate are positively related to the banking systemic risk,and the contribution of the first-tier urban real estate bubbles to the banking systemic risk is higher than that of the national real estate bubbles.In addition,the systemic risk of China’s financial institutions is measured based on MES,and the robustness of the impact of bubbles on systemic risk is tested.Finally,this paper discusses the policy response of China’s asset capital to the real estate market and the potential bubble risk during the future 14 th five-year Plan period,combined with the current macro-prudential supervision system,for regulators to formulate policies to prevent bubbles,to provide a reference basis for reducing systemic risks,and to further improve China’s current macro-prudential assessment framework to keep the bottom line of systemic risks.