Risk Analysis of the Stock Price Index of Countries Participating in the “Belt and Road” Initiative - Based on GARCH-VaR Model

Abstract

The “Belt and Road” Initiative has attracted worldwide attention since its initial stage. The initiative is to unite countries participating in the “Belt and Road” Initiative (B&R countries), to build a community with a shared future for mankind, and to achieve mutual benefit and win-win. Since the implementation of the initiative, China’s outward foreign direct investment (OFDI) has ushered in a new upsurge, and a large amount of money has been invested in B&R countries. However, China lacks experience in OFDI, as it has not been long since China engaged in OFDI. Besides, most of the B&R countries are developing countries with immature market. As the barometer of the macroeconomy, the stock market can reflect fluctuations of the real economy and forecast the development trend of the macroeconomy. To explore the opportunities and challenges brought by the “Belt and Road” Initiative to the stock market of B&R countries, this study selects 8 countries with the most active stock market among B&R countries, and analyzes the impact of the “Belt and Road” Initiative on the stock price index risk of the 8 countries. In this study, the data are divided into 2 groups, i.e., pre-initiative and post-initiative. The GARCH-VaR model is used to calculate the stock price index risk of each country. The empirical results show that the “Belt and Road” Initiative has different effects on the stock price index risk of the 8 countries. After the “Belt and Road” Initiative, the fluctuation of China Shanghai Shenzhen 300 Stock Index Futures is far lower than that before the implementation of the initiative, and the stock price index risk of some countries has also been reduced.