Exploring Systemic Risk Dynamics in the Chinese Stock Market: A Network Analysis with Risk Transmission Index

Xiaowei Zeng, Yifan Hu (), Chengjun Pan and Yanxi Hou ()
Additional contact information
Xiaowei Zeng: School of Management, Fudan University, Shanghai 200433, China
Yifan Hu: School of Data Science, Fudan University, Shanghai 200433, China
Chengjun Pan: School of Data Science, Fudan University, Shanghai 200433, China
Yanxi Hou: School of Data Science, Fudan University, Shanghai 200433, China

Risks, 2024, vol. 12, issue 3, 1-24

Abstract: Systemic risk refers to the potential for a disruption in one part of a financial system to trigger a cascade of adverse effects, impacting the functioning of the system. Despite the progress on novel systemic risk measures, research on dynamics of systemic risk network structure and its community effect is still in its initial state. In this study, we utilize price data from 107 representative Chinese stocks spanning the period from 2017 to 2022. A systemic risk network is derived from the Risk Transmission Index based on TENET and the QR–Lasso model. By utilizing DBSCAN, HITS and community detection algorithms on the network, we aim to propose a more suitable definition of systemically important companies, explore the interrelationships between companies, and discuss its plausible reasons for dynamics structural changes. The empirical findings demonstrate a substantial involvement of insurance companies in both contributing to and receiving systemic risk within the analyzed context. We identify prominent risk output and input centers, and emphasize the profound impact of the COVID-19 pandemic on the dynamics of systemic risk.

Keywords: Chinese stock market; systemic risk; CoVaR; network analysis; community detection (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/12/3/56/pdf (application/pdf)
https://www.mdpi.com/2227-9091/12/3/56/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:12:y:2024:i:3:p:56-:d:1360214

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().