Systemic Risk Spillover Effect between Banking and Insurance Industry—Based on the CoVaR Method

Abstract

Selects the July 6, 2007 - July 4, 2016, China's insurance and banking industry index. Applies the CoVaR method, which is proposed by Adrian and Brunnermeier, to measure the direction and size of systemic risk spillover between insurance and banking industries. Considering the application of AR-GARCH model to estimate the parameters of the results is better than traditional quantile regression. Then the estimation of parameters based on AR-GARCH-M model, to calculate and analyze the risk spillover effect between banking and insurance industries in our country. According to the conclusion of the empirical research, the risk spillover effect of the banking industry to the insurance industry is larger than that the insurance industry to the banking industry. Moreover, both banking industry and insurance industry are positive risk spillover effects.