The Risk Spillover Effects of Securities Companies in China’s Capital Market with the CoVaR Method

Li Wang

Journal of Applied Finance & Banking, 2019, vol. 9, issue 3, 7

Abstract: In China’s capital market, securities companies are not only converging but also intertwined in business. Once in crisis, their risks may not only infect one another but also impact the whole market. Based on the CoVaR method, from both static and dynamic dimensions, this paper uses the quantile regression and principal component analysis to quantify the risk spillover effects between securities firms and the contributions of individual securities firms to the systemic risk of capital market, and studies the factors influencing the contributions. The results show that when in crisis, CITIC Securities contributes the most to the systemic risk, followed by Haitong Securities and others. Characteristics of securities firms have great influence on their risk contributions as well, such as leverage ratio, maturity mismatch, market scale and price-to-book ratio. JEL Classification Numbers: G11, G24, G28Keywords: Risk Spillover Effect; Securities Companies; Capital Market; CoVaR

Date: 2019
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