Abstract
After the 2008 financial crisis, the whole world financial markets became more fluctuates, the same to China also. It is necessary to pay great attention to high volatility problem in Chinese market, and also the uncertainty problem, risk accumulation and spillover effect come along with it. This paper calculates stock market return and builds financial stress index to explore the risk spillover effect. Empirical results show that the Chinese financial market have higher volatility than other countries. The Chinese stock market had higher dynamic market co-movement with international financial markets after 2008 financial crisis. What’s more, this article also finds the financial risk spreads between China and US. When the US financial stress index increases, China's financial stress index experiences a larger increase. However, after the change in China's financial stress index, the US financial stress index has no obvious trend of change. So we should pay more attention to periods of Chinese financial market risk and its spillover.
Highlights
Since the global financial crisis in 2008, financial markets all over the world have suffered turbulence
According to stock market indices ( CSI 300 index, S&P500 Index and MSCI index), the GARCH(1,1) model is used to estimate the volatilities of three stock markets (China, US and Europe).Compared with US and Europe, the empirical results show these characteristics of stock volatilities in China: 1. Except during the 2008 financial crisis, China experiences higher volatility than other international financial markets
The results of this study prove that the Chinese stock market had higher dynamic market co-movement than other international financial markets after 2008 financial crisis
Summary
Since the global financial crisis in 2008, financial markets all over the world have suffered turbulence. Since the financial crises, developed countries and emerging market economies tried to recover. As an emerging market country, China is much more vulnerable to external shocks than developed countries, and its financial markets fluctuate more. According to Chinese financial markets high fluctuation, the risks will spillover among China, US and another international countries. Financial spillovers are defined in this paper as the transmission of a risk shock in one country to asset prices in other countries.
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