The measurement and analysis of the systemic risk in China's stock market

The systemic risk in the stock market derives from the difference between the market price of the stock and its intrinsic value. Price/Earnings Ratio (P/E) method and GDP method are mainly adopted to measure the difference. The key to apply the P/E method is the confirmation of risk-free rate of return and for GDP method is the confirmation of base exponent and adjusting variable beta. Because of the low securitization rate in China and the fast developing economy, systemic risk exists to a certain extent still under control, however, it should be paid more attention and regulation.