Social Sciences in China (Chinese Edition)

No.11, 2019

The Salient Risk Points in China’s Capital Market and the Counterfactual Simulation of Supervision and Regulation

(Abstract)

Wang Shaoping and Zhao Zhao

Targeting the operation of China’s capital market in 2015 and the intervention by the securities regulatory authorities to stabilize the market, we used the GSADF and BSADF to conduct a bubble test on the CSI 300 Index and its ten first-level sectoral indices so as to determine the start and end time and microstructure of the bubble and discover the causal relationship between the market bubble and the industry bubble. In this way, we identify the salient risk points, conduct a series of counterfactual simulation analyses and propose real-time regulatory recommendations to resolve the salient risk points. This is the first time the evidence provided by counterfactual simulation has been used to respond to the questions of the international financial community about China’s intervention in the stock market.