arXiv 23 Feb 2026 · Econometrics
arXiv:2602.19740 · PDF · DOI · OpenAlex · Extracted main text
Sentiment towards the Chinese real estate sector has deteriorated following the introduction of financing constraints in 2020 with the ”three red lines." Forcing developers to restructure their debt, the policy triggered a cascade of financing troubles, defaults, and reduced housing demand, ultimately culminating in a prolonged real estate crisis. This paper utilizes a network approach in line with Demirer et al. (2018) and Diebold and Yilmaz (2014) to measure daily time-varying connectedness in the stock return volatilities of major Chinese real estate developers throughout the crisis. Focusing on spillover between companies as reflected by market perception, this paper examines how connectedness evolves over time across firms with different regional exposures and state-ownership statuses, filling a gap in the literature to elucidate where property demand and real estate firm trustworthiness have deteriorated most. An event-study analysis of four key moments of the crisis outlines distinct phases of market sentiment: with the introduction of the three red lines, connectedness primarily reflects shared exposure and a uniform shock to the market. Then, the early unrest surrounding Evergrande exposes strong regional differentiation, with firms concentrated in less developed regions receiving significant spillover. By one year into the crisis, previously stable regions receive higher levels of spillover, and there is evidence of a substitution effect towards private developers. Two years into the crisis, the market has much less homogeneity in effects across regions and state-ownership status: major shocks induce minimal network changes, reflecting how investors have already priced in their beliefs. This paper also offers one of the most extensive timelines of the Chinese real estate crisis to date, and a new R package, GephiForR, was created for the network visualization in this paper.
appendix boundary found by appendix_command · 49% of the source is main text. Read the extracted text to check this.
The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Diebold, Francis and Yilmaz, Kamil (2014) On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms | 1.000 | 7 | 4 | 100% |
| 2 | Demirer, Mert. and Diebold, Francis and Liu, Laura. and Yılmaz, Kamil (2018) Estimating Global Bank Network Connectedness | 0.977 | 15 | 6 | 93% |
| 3 | Chow, Yun Kei (2024) The Evergrande Story: A Look into Chinese Corporate Law and the Redefinition of Privately Owned Enterprises and Their Relationsh… | 0.737 | 5 | 3 | 40% |
| 4 | Diebold, Francis and Yilmaz, Kamil (2015) Financial and Macroeconomic Connectedness: A Network Approach to Measurement and Monitoring | 0.644 | 2 | 2 | 100% |
| 5 | Manso, Julia (2024) GephiForR: An R package for creating Gephi-style network visualizations self | 0.644 | 2 | 2 | 100% |
| 6 | Zhu, Charlie and Dong, Emma and Choong Wilkins, Rebecca and Kwan, Sh… (2021) Kaisa Offers Bond Exchange to Avoid Potential Default | 0.511 | 3 | 2 | 33% |
| 7 | Choi, Martin and Ao, Yulu (2023) Country Garden warns of large first-half loss amid real estate sector pressures | 0.511 | 2 | 2 | 50% |
| 8 | Jacomy, Mathieu and Venturini, Tommaso and Heymann, Sebastien and Ba… (2014) ForceAtlas2, a Continuous Graph Layout Algorithm for Handy Network Visualization Designed for the Gephi Software | 0.511 | 2 | 2 | 50% |
| 9 | Jim, Clare (2022) China courts freeze $157 mln of Evergrande assets over missed construction payments | 0.511 | 2 | 2 | 50% |
| 10 | Jim, Clare and Yu, Xie (2024) China Evergrande ordered to liquidate in landmark moment for crisis-hit sector | 0.511 | 2 | 2 | 50% |
Showing the top 10 of 152 scored citations.