Study on Tail Characteristics of Systemic Risk in US and Chinese Stock Markets

Abstract

Trade friction between the United States and China has increased financial risks. Since 2017, the stock markets of the United States and China have shown extremely high-risk dependence. By constructing Markov SJC Copula model, this paper makes an empirical analysis on the systemic risk of American and Chinese stock markets. The results show that SJC Copula can describe the systemic risk of American and Chinese stock markets well. In addition, studies show that the risk dependence of the U.S. and Chinese stock markets also has obvious tail dynamic characteristics. Under the high-risk zone system, the dependence of the lower tail risk is more significant.