Background and Motivation
Systemic financial risk remains a critical challenge for modern economies, underscored by recurring crises such as the 2008 global financial meltdown, the 2015 Chinese stock market crash, and the COVID-19 pandemic. Traditional research has often examined sectors in isolation or focused on pairwise risk spillovers, overlooking the complex, multi-sector dependencies that can amplify systemic threats. This study addresses that gap by exploring higher-order interactions—where risks resonate simultaneously across multiple sectors—within China’s stock market. By moving beyond conventional dyadic models, the research provides a more nuanced understanding of how collective risk behaviour shapes financial stability.
Methodology and Scope
Using the Reconstructing the Higher Order Structure of Time Series (RHOSTS) method, the authors construct dynamic higher-order networks to capture risk co-movement among 24 Chinese stock sectors from 2007 to 2024. Sectoral volatility is estimated via GJR-GARCH models, and hyperedges represent synchronised risk resonance across multiple sectors. Network topology metrics—such as higher-order degree, systemic importance, and clustering coefficient—are analysed at both sector and system levels. The study further integrates these metrics into a coupled-map-lattice model to quantify time-varying resilience during major crises, including the 2008 financial crisis, the 2015 market crash, and the COVID-19 pandemic.
Key Findings and Contributions
Why It Matters
The study offers a paradigm shift in systemic risk analysis by capturing group-level risk synchronisation that traditional models miss. This approach reveals how multi-sector co-movements can accelerate contagion and create hidden vulnerabilities. By identifying crisis-specific resonance clusters and tracking resilience in real time, the research provides a more precise tool for monitoring and mitigating systemic threats in increasingly interconnected financial systems.
Practical Applications
Discover high-quality academic insights in finance from this article published in China Finance Review International . Click the DOI below to read the full-text!
China Finance Review International
News article
Collective risk resonance behavior and network resilience in Chinese stock sectors: evidence from higher-order financial network
11-Nov-2025