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| Systemic Risk, Market Discipline and Return of Bank Stocks:Based on CoVaR and Time Varying Conditional β |
| ZHANG Xiaoming, LI Zeguang
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School of Economics and Management, Beijing Jiaotong University;
School of Finance, Nankai University |
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Abstract The interdependence of commercial banks' risks has become urgent research topics currently. This paper measures the time-varying covariance coefficient by using DCC-MGARCH methods. Meanwhile, we try to build Beta indicators, with the stock price variables of listed banks to quantify the spillover risk measure its extent effects. The market discipline mechanism can increase higher required return on banks with systemic risk, showing intrinsic leveling mechanism of the market, but the failure at tail risk pricing reminds the necessary of regulators' liquidity and approporiate monetary policy in order to avoid the systemic crisis. At the same time, with the macro-level and bank-level data analysis of the main determinants of the risk of spillover of the banks, we use Shapley decomposition approach to decompose the contribution structure of systematic risk. Conclusions are drawn that the risk of spillover Overall, commercial banks have some pro-cyclical characteristics, ΔCoVaR indicators of joint-stock commercial banks are more significant; and macro variables are the key factors that determine ΔCoVaR indicators, capital adequacy ratios, liquidity ratios, and Beta Index are indicators the key decision variables. This shows that different indicators have strong complementarily in monitoring various risk factors.
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Received: 17 March 2017
Published: 02 April 2018
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