Abstract: Under the background of economic globalization, with the process of the world economic integration, the free flow of information and capital becomes more clear, and the financial market risk transfer from one market to another market. Therefore, study of the risk spillover effect of financial markets has become the focus of financial supervision departments and scholars. In paper, the risk spillover effect between stock market and ETF market in china is analyzed based on CoVaR method combined with Afactor-MSV model. This combined model can measure the risk spillover effect between two different markets without copula functions, and it has higher fitting degree in reality than other models. In the first step, joint distribution model of stock market and ETF market is established by using the Afactor-MSV model, and MCMC method based on Gibbs sampling is put forward to estimate parameters of the combined model. Then, the risk spillover intensity between two markets is measured by using CoVaR function. Based on the daily prices of Chinese stock market index and ETF market index over January 4, 2010-April 30, 2015, our results demonstrate that there is two-way spillover effect between stock market and ETF market in china, the degree of risk spillover effect from stock market to ETF market is stronger than that of from ETF market to stock market. Meanwhile, it is also found that there is long-lasting effect of volatility shock on stock market and ETF Market. The empirical results can provide the reference for investors making investment decisions, and it is also valuable for regulation of financial markets.

Key words: afactor-MSV, CoVaR, financial market, ETF market, risk spillover