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Tail-risk interconnectedness in the Chinese insurance sector

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  • Cao, Yufei
Abstract
We investigate tail-risk interconnectedness in the Chinese insurance sector by proposing downside and upside tail-risk spillover networks before and after the onset of the COVID-19 pandemic. The constructed networks allow us to capture marginal tail losses and time-varying tail-risk spillover effects. To identify the tail-risk transmission mechanism, we analyze network metrics. We find that tail-risk interconnectedness increased after the pandemic, showing that the risk level of the insurance sector has risen. Moreover, we use predictive panel regressions to investigate the impact of COVID-19 on tail-risk interconnectedness. We find that insurers’ size, liability-to-asset ratio, equity ratio, and book value per share are common factors that affect downside and upside tail-risk interconnectedness.

Suggested Citation

  • Cao, Yufei, 2023. "Tail-risk interconnectedness in the Chinese insurance sector," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001277
    DOI: 10.1016/j.ribaf.2023.102001
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    References listed on IDEAS

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    1. Andrieş, Alin Marius & Ongena, Steven & Sprincean, Nicu & Tunaru, Radu, 2022. "Risk spillovers and interconnectedness between systemically important institutions," Journal of Financial Stability, Elsevier, vol. 58(C).
    2. Roukny, Tarik & Battiston, Stefano & Stiglitz, Joseph E., 2018. "Interconnectedness as a source of uncertainty in systemic risk," Journal of Financial Stability, Elsevier, vol. 35(C), pages 93-106.
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    6. Zhang, Weiping & Zhuang, Xintian & Wang, Jian & Lu, Yang, 2020. "Connectedness and systemic risk spillovers analysis of Chinese sectors based on tail risk network," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    7. Abadie A., 2002. "Bootstrap Tests for Distributional Treatment Effects in Instrumental Variable Models," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 284-292, March.
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    Cited by:

    1. Ke, Rui & Shen, Anni & Yin, Man & Tan, Changchun, 2024. "The cross-sector risk contagion among Chinese financial institutions: Evidence from the extreme volatility spillover perspective," Finance Research Letters, Elsevier, vol. 63(C).
    2. Shi, Xiaojun & Du, Baorui, 2024. "Decomposition of social networks and household purchase of insurance as knowledge products," Research in International Business and Finance, Elsevier, vol. 69(C).

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