Risk spillover in China's real estate industry chain: a DCC-EGARCH-ACoVaR model

Real estate's role in the financial crisis has forced central banks and academics to focus on the real estate risk's spillover effects. However, findings on this matter are erratic and could differ from country to country. Prior research mostly ignored risk contagion at the level of the real industry and instead concentrated on real estate and financial institutions. Therefore, to analyze the risk spillover of China's real estate industry from a novel perspective of the industrial chain, a mixed model (DCC-EGARCH-CoVaR model) is proposed in this work. It fixes the flaw in existing models' inability to account for asymmetries and the weakness of traditional methods in explaining the time-varying and nonlinear risk infection process. The findings demonstrate that China's real estate industry has a noticeable risk spillover effect on upstream and downstream industries. The downstream industry is the one most affected by risk spillover from the real estate sector, followed by the upstream industry, and the banking sector is the least affected. The risk spillover effects of macro uncertainties like the COVID-19 outbreak, the financial crisis, and the stock market fall on real estate vary significantly. These findings are helpful for regulators to prevent systematic financial risks and for institutional investors to make timely strategic asset allocations and adjustments.