Research on external financial risk measurement of China real estate

Yuexiang Jiang, Luyuan Zheng and Jiazhen Wang

International Journal of Finance & Economics, 2021, vol. 26, issue 4, 5472-5484

Abstract: This study applies the method proposed by Diebold and Yilmaz to construct a spillover effect index with which we compare the bilateral information spillover effect and time‐varying characteristics of China's real estate markets to those of representative international financial markets from July 2005 to March 2018 to measure the financial risks in China's real estate markets. The empirical results show the following. (a) There is a significant information spillover effect between China's real estate markets and related stock markets, and China's real estate is in a net information receiving position. (b) After 2016, China's real estate financial risks entered a downward adjustment cycle, and financial risks have gradually declined. These results suggest that Chinese real estate markets' “de‐inventory” has achieved remarkable results and that real estate financial risks have been significantly reduced. However, due to China's limited real estate financial investment channels, the nation's real estate markets should still be cautiously controlled and regulated to respond to potential real estate financial risk.

Date: 2021
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https://doi.org/10.1002/ijfe.2075

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