Journal of Risk

Risk.net

Systemic risk of the Chinese stock market based on the mobility measures of the marginal expected shortfall

Xiaohang Liu and Handong Li

  • We apply the dynamic mixture Copula model method to depict the systemic risk in China.
  • According to the rank of MES, we propose the mobility measure of MES and focus on the changes of the rank.
  • The empirical results suggest that the mobility of the MES is strong in the stable stage of the stock market, while the MES ranking of stocks tends to be disordered.
  • Most of the MES time series have strong long-term memory.
     

This paper applies the dynamic mixture copula model method and proposes a mobility measure of the marginal expected shortfall (MES) to depict the changing systemic risk in China’s mainland stock market and Hong Kong’s stock market. The empirical analysis focuses on the rank of individual stocks’ MES and the changes in the rank. The empirical results suggest that the mobility of MES is strong in the stable stage of the market, while the MES ranking of stocks tends to be disordered. When risk events occur, the MES ranking is relatively stable and the market risk is always affected by the same specific stocks. This property gives us a new perspective on risk management and deepens our understanding of the characteristics of systemic risk. In addition, most of the MES time series have strong long-term memory, which indicates that the risks of individual stocks have persistent impacts on the market’s systemic risk.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: