IDEAS home Printed from https://ideas.repec.org/a/wly/intsec/v19y2024i2p186-222.html
   My bibliography  Save this article

Bank tail risk in China

Author

Listed:
  • Huan Yang
  • Jun Cai
  • Lin Huang

Abstract

In this study, we investigate the tail dependency between bank stocks in China and 35 common risk factors. We measure univariate and multivariate conditional tail risk probabilities. The evidence indicates that tail events from risk factors in the banking, security trading, real estate, and energy industries have the largest effects on the realization of extreme returns from Chinese bank stocks. The univariate conditional tail risk is considerably higher than the unconditional tail risk. The impact of multiple tail events from several risk factors occurring simultaneously is much stronger than tail events from one single risk factor. In general, there is a stronger cross‐market tail linkage between emerging market risk factors and bank stocks in China when compared with developed market risk factors. However, the cross‐market tail linkage between developed market risk factors and bank stocks in China rose sharply during the 2008 financial crisis.

Suggested Citation

  • Huan Yang & Jun Cai & Lin Huang, 2024. "Bank tail risk in China," International Studies of Economics, John Wiley & Sons, vol. 19(2), pages 186-222, June.
    • Handle: RePEc:wly:intsec:v:19:y:2024:i:2:p:186-222
    DOI: 10.1002/ise3.76
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ise3.76
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ise3.76?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Beatty, Anne & Liao, Scott, 2014. "Financial accounting in the banking industry: A review of the empirical literature," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 339-383.
    2. Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor & Francis Journals, vol. 5(1), pages 9-24.
    3. Viral Acharya & Robert Engle & Matthew Richardson, 2012. "Capital Shortfall: A New Approach to Ranking and Regulating Systemic Risks," American Economic Review, American Economic Association, vol. 102(3), pages 59-64, May.
    4. Tabak, Benjamin M. & Fazio, Dimas M. & Cajueiro, Daniel O., 2013. "Systemically important banks and financial stability: The case of Latin America," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3855-3866.
    5. Ye, Wuyi & Liu, Xiaoquan & Miao, Baiqi, 2012. "Measuring the subprime crisis contagion: Evidence of change point analysis of copula functions," European Journal of Operational Research, Elsevier, vol. 222(1), pages 96-103.
    6. Dimson, Elroy, 1979. "Risk measurement when shares are subject to infrequent trading," Journal of Financial Economics, Elsevier, vol. 7(2), pages 197-226, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yang, Huan & Cai, Jun & Huang, Lin & Marcus, Alan J., 2021. "Bank stocks, risk factors, and tail behavior," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 203-229.
    2. Qin, Yiyi & Cai, Jun & Wang, James J.D. & Webb, Robert I., 2023. "Gold-mining stocks, risk factors, and tail patterns," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    3. Nguyen, Cuong & Ishaq Bhatti, M. & Henry, Darren, 2017. "Are Vietnam and Chinese stock markets out of the US contagion effect in extreme events?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 480(C), pages 10-21.
    4. Mary L. Z. Ma & Victor Song, 2016. "Discretionary Loan Loss Provisions and Systemic Risk in the Banking Industry," Accounting Perspectives, John Wiley & Sons, vol. 15(2), pages 89-130, June.
    5. Alexakis, Christos & Kenourgios, Dimitris & Pappas, Vasileios & Petropoulou, Athina, 2021. "From dotcom to Covid-19: A convergence analysis of Islamic investments," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    6. Woon Sau Leung & Nicholas Taylor, 2013. "Testing for contagion: the impact of US structured markets on international financial markets," Chapters, in: Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), Handbook of Research Methods and Applications in Empirical Finance, chapter 11, pages 256-284, Edward Elgar Publishing.
    7. Mardi Dungey & Eric Renault, 2018. "Identifying contagion," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 33(2), pages 227-250, March.
    8. Justin Yiqiang Jin & Yi Liu, 2024. "The Impact of Stock Price Crash Risk on Bank Dividend Payouts," JRFM, MDPI, vol. 17(5), pages 1-25, May.
    9. Dudek, Jérémy, 2013. "Illiquidité, contagion et risque systémique," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/13236 edited by Le Fol, Gaëlle.
    10. Huynh, Toan Luu Duc & Nasir, Muhammad Ali & Nguyen, Sang Phu & Duong, Duy, 2020. "An assessment of contagion risks in the banking system using non-parametric and Copula approaches," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 105-116.
    11. Yiwei Fang & Iftekhar Hasan & Woon Sau Leung & Qingwei Wang, 2019. "Foreign ownership, bank information environments, and the international mobility of corporate governance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(9), pages 1566-1593, December.
    12. Contessi, Silvio & De Pace, Pierangelo & Guidolin, Massimo, 2020. "Mildly explosive dynamics in U.S. fixed income markets," European Journal of Operational Research, Elsevier, vol. 287(2), pages 712-724.
    13. Fenech, Jean-Pierre & Skully, Michael & Xuguang, Han, 2014. "Franking credits and market reactions: Evidence from the Australian convertible security market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 1-19.
    14. Calcagno, R. & Renneboog, L.D.R., 2004. "Capital Structure and Managerial Compensation : The Effects of Renumeration Seniority," Discussion Paper 2004-120, Tilburg University, Center for Economic Research.
    15. Chang, Carolyn W. & Li, Xiaodan & Lin, Edward M.H. & Yu, Min-Teh, 2018. "Systemic risk, interconnectedness, and non-core activities in Taiwan insurance industry," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 273-284.
    16. Muhammad Kashif & Thomas Leirvik, 2022. "The MAX Effect in an Oil Exporting Country: The Case of Norway," JRFM, MDPI, vol. 15(4), pages 1-16, March.
    17. Gerardo Manzo & Antonio Picca, 2020. "The Impact of Sovereign Shocks," Management Science, INFORMS, vol. 66(7), pages 3113-3132, July.
    18. Manganaris, Panayotis & Beccalli, Elena & Dimitropoulos, Panagiotis, 2017. "Bank transparency and the crisis," The British Accounting Review, Elsevier, vol. 49(2), pages 121-137.
    19. Brian H. Boyer & Taylor D. Nadauld & Keith P. Vorkink & Michael S. Weisbach, 2023. "Discount‐Rate Risk in Private Equity: Evidence from Secondary Market Transactions," Journal of Finance, American Finance Association, vol. 78(2), pages 835-885, April.
    20. Claeys, Peter & Vašíček, Bořek, 2014. "Measuring bilateral spillover and testing contagion on sovereign bond markets in Europe," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 151-165.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:intsec:v:19:y:2024:i:2:p:186-222. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.