An Empirical Research on Tail Dependence in China Stock Market

Abstract

This article defines coefficient of upper-lower tail dependence and coefficient of lower-upper tail dependence based on coefficient of upper tail dependence and coefficient of lower tail dependence and does an empirical research on tail dependence in China stock market. A mixed Copula that can well describe dependence structure between Shanghai Exchange Composite Index(SHECI) and Shenzhen Exchange Component Index(SZECI) is found by empirical analysis firstly, and is used to calculate coefficients of tail dependence. The results show that there are strong upper tail dependence and lower tail dependence, but no upper-lower tail dependence and lower-upper tail dependence between daily returns of SHECI and SZECI.