Synchronicity of Industry Index Volatility,Risk Spillover,and Contagion Channels:Empirical Evidence from the Chinese Stock Market
This study harnesses the GED-GJR-GARCH-DCC model to explore the syn-chronicity of industry oscillations,utilizing data from the SWS primary industry indices spanning 2005 to 2021.The methodology encompasses the generalized variance decomposition approach of the vector autoregression model to architect a hierarchical network of volatility risk spillover,thereby probing the interspersed contagion of risk across industries.The results elucidate a pro-nounced"event-driven"attribute in the dynamic oscillations within industries.Extreme occur-rences not only amplify the synchronicity,asymmetry,and spillover implications of inter-industry fluctuations,but they also disrupt the inherent structure of the industry volatility correlation net-work.With respect to the directional spillover of industry volatility,mid-chain manufacturing sectors exhibit a potent risk spillover capacity.Conversely,upstream resource sectors and ancillary financial sectors are more susceptible to shocks from other industries,demonstrating a net risk ab-sorption phenomenon.The hierarchical network of industry volatility spillover divulges a contagion pathway from"risk-emitting industries"to"risk-intermediary industries,"and finally to"risk-absorbing industries."In view of these findings,it is advocated that regulatory bodies imple-ment stratified supervision according to industry risk contagion mechanisms,mitigate the synchro-nicity of industry oscillations,sever risk contagion channels,and augment capabilities for risk sur-veillance and mitigation.
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