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Systemic Risk Contributions of Financial Institutions during the Stock Market Crash in China

Author

Listed:
  • Miao He

    (School of Statistics, Renmin University of China, Beijing 100872, China)

  • Yanhong Guo

    (Department of Finance, Business School, Southern University of Science and Technology, Shenzhen 518055, China)

Abstract

This paper investigates the systemic risk contributions of each financial institution during the stock market crash in China using systemic risk beta. Based on the FARM-Selection (Factor Adjusted Regularized Model Selection) approach, we calculate the systemic risk beta, implying the importance of each financial institution during the stock market crash. We find that security firms are the main contributors to systemic risk. In addition, some macro variables have a significant influence on systemic risk, including changes in March Treasury rates and the AAA-rated bond and 10-year Treasury credit spreads. This paper provides an important perspective to identify the SIFIs (Systemically Important Financial Institutions) during the stock market crash.

Suggested Citation

  • Miao He & Yanhong Guo, 2022. "Systemic Risk Contributions of Financial Institutions during the Stock Market Crash in China," Sustainability, MDPI, vol. 14(9), pages 1-14, April.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:9:p:5292-:d:803925
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    References listed on IDEAS

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    Cited by:

    1. Fatima Sultana & Muhammad Aslam & Ammara Sarwar & Amjad Iqbal, 2022. "Impact of Audit Quality on Stock Price Crash Risk: Evidence from Pakistan Stock Exchange," Journal of Economic Impact, Science Impact Publishers, vol. 4(3), pages 161-169.

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