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Asymmetric extreme risk spillovers between the Chinese stock market and index futures market: An MV-CAViaR based intraday CoVaR approach

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  • Jian, Zhihong
  • Wu, Shuai
  • Zhu, Zhican

Abstract

This paper proposes a predictive CoVaR measure to analyze asynchronous risk spillovers between the Chinese stock and futures market. We jointly model the intraday CoVaR dynamics using an extended MV-CAViaR model. The results show the presence of asymmetric spillovers under different market states, different trading rules, and different confidence levels. Specifically, there exist significant downside spillovers and insignificant upside spillovers. Moreover, the futures (stock) market becomes dominant in risk transmission during bearish (bullish) market periods. Furthermore, high margin requirements would weaken the spillover effects of the futures market, but it would also strengthen the spillover effects of the stock market.

Suggested Citation

  • Jian, Zhihong & Wu, Shuai & Zhu, Zhican, 2018. "Asymmetric extreme risk spillovers between the Chinese stock market and index futures market: An MV-CAViaR based intraday CoVaR approach," Emerging Markets Review, Elsevier, vol. 37(C), pages 98-113.
  • Handle: RePEc:eee:ememar:v:37:y:2018:i:c:p:98-113
    DOI: 10.1016/j.ememar.2018.06.001
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    1. repec:eee:ememar:v:40:y:2019:i:c:2 is not listed on IDEAS

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    Keywords

    Intraday CoVaR; MV-CAViaR; Asymmetric risk spillovers; Spot stock and index futures markets;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G1 - Financial Economics - - General Financial Markets

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