Relationship between Volatility of Shibor Rates and IPOs of Big and Medium Sized Enterprises - An Empirical Study Using Chinese Data

Abstract

Using a daily sample of the 1-week Shanghai interbank offered rate, we research the volatility of Chinese spot rate using EGARCH model, and then calculate its value at risk by VaR-EGARCH model. We also examine the effect of IPOs of big and medium enterprises in Chinese stock market on Shibor rates. The results show that big and medium sized IPOs have a significant impact on Shibor rates. The huge IPOs resulted in abnormal volatility of Shibor rates, and caused great risk in the 2007 and 2008. The reform of IPOs system in 2009 has reduced the effect of huge IPOs on Shibor rates a lot.