Research on risk transmission mechanism of Chinese A-share industry under COVID-19 based on VAR model

Abstract

This article uses Python to implement the VAR model to construct the volatility spillover effect of industry sub-index merged by Shenwan's first-class classification. The systemic financial risk transmission relationship among different industries of Chinese A-share listed companies under the background of public health emergencies was observed, and the driving mechanism behind it was studied in depth. The empirical results show that the spillover impact of COVID-19 risk on industry volatility is significant in 2 days prediction period, but part of the risk impact can be absorbed by the market as the prediction period is extended to 5 days. The external market risk impact on non-financial service and financial industry has the most significant positive correlation with COVID-19 indicators, while the external impact of comprehensive industry on A-share market has the most significant positive correlation with COVID-19 indicators. On this basis, considering the difference in time between economic variables and COVID-19 variables and weekend effect, this paper innovatively constructed intermediate-term indicators and short-term indicators, this paper concluded that the impact of intermediate-term indicators on industry risk impact is greater than that of short-term indicators. To sum up, from the perspective of public health emergencies and industries, this paper puts forward relevant opinions on how to effectively prevent the impact of epidemic, which provides an effective reference for improving the systemic risk supervision mechanism of Chinese A-share market.