Systemic Jump in Chinese Stock Market

In order to test the existence of systemic jump in returns in Chinese Stock Market, this paper estimated a multivariate stochastic volatility jump-diffusion model, which assumes that returns are affected by both systemic jumps and idiosyncratic jumps. Taking the 50 index of Shanghai and the stocks from different industries of the stock market as an example, through developing Markov Chain Monte Carlo simulation to estimate its parameters and found significant evidence of the existence of systemic jumps. Although systemic jumps are significantly present, the majority of jumps are idiosyncratic. A new perspective that views systemic jump as a part of systemic risk contributes to systemic risk management of financial crisis.