Modeling the Dependence Structure of Share Prices among Three Chinese City Banks

Guizhou Liu, Xiao-Jing Cai and Shigeyuki Hamori
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Guizhou Liu: Graduate School of Economics, Kobe University, 2-1, Rokkodai, Nada-Ku, Kobe 657-8501, Japan
Xiao-Jing Cai: Graduate School of Economics, Kobe University, 2-1, Rokkodai, Nada-Ku, Kobe 657-8501, Japan

JRFM, 2018, vol. 11, issue 4, 1-18

Abstract: We study the dependence structure of share price returns among the Beijing Bank, Ningbo Bank, and Nanjing Bank using copula models. We use the normal, Student’s t, rotated Gumbel, and symmetrized Joe-Clayton (SJC) copula models to estimate the underlying dependence structure in two periods: one covering the global financial crisis and the other covering the domestic share market crash in China. We show that Beijing Bank is less dependent on the other two city banks than Nanjing Bank, which is dependent on the other two in share price extreme returns. We also observe a major decrease of dependency from 2007 to 2018 in three one-to-one dependence structures. Interestingly, contrary to recent literatures, Ningbo Bank and Nanjing Bank tend to be more dependent on each other in positive returns than in negative returns during the past decade. We also show the dynamic dependence structures among three city banks using time-varying copula.

Keywords: city banks; dependence structure; copula (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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