Research On The Influence Of Policy Factors On Stock Market Volatility Based On GARCH-MIDAS Model

Since the establishment of the Shanghai and Shenzhen Stock Exchanges in December 1990,the Chinese stock market has been in operation for nearly 29 years.Despite nearly 29 years of development and exploration,China's capital market still has a big gap compared with the mature capital market in the West.The Chinese economy is not fully marketized at this stage.Although the Party Central Committee has proposed that the market should play a decisive role in resource allocation,from the current point of view,the government's macro-control policies have played an important role in the healthy development of China's economic and financial markets.Throughout the development of China's securities market,we can find that every abnormal increase in China's stock market volatility is almost inextricably linked with some policies issued at that time.Policy events have caused abnormal fluctuations in the securities market and have become one of China's financial markets.One of the big features.Frequent and violent fluctuations in the securities market can have many negative effects.First of all,the excessive volatility of the stock market leads to unstable stock prices,which can not effectively reflect the fair value of listed companies and reduce the function of financial market price discovery.Second,the volatility of the stock market has increased the difficulty of investor risk management and asset pricing.It has weakened the ability of market resources allocation;Thirdly,the volatility of the stock market will damage the interests of investors,especially small and medium investors,and will reduce investors' confidence in the future of the market,which is not conducive to maintaining market sentiment and vitality.It will reduce market liquidity and reduce market depth.Finally,looking at the development experience of Western financial markets,serious stock market turmoil may further trigger economic crisis,which is not conducive to the healthy development of the country's macro economy.Based on this,this paper explores the impact of different types of policy events on stock market volatility from both theoretical analysis and statistical evidence.On the one hand,review the classic financial theory at home and abroad,analyze the economic principles of various policy events affecting the stock market volatility;on the other hand,collect relevant data and quantitatively study the long-term effects of different policies on stock market volatility through empirical analysis and The influence of time evolution,and strive to achieve a combination of theory and practice,in order to reveal the operating characteristics and laws of China's stock market volatility and the impact of policy events on stock market volatility.To provide policy advice and reference basis for regulators and ordinary small and medium investors,to mitigate the negative impact of policy release on the market,in order to help the Chinese stock market develop healthily and steadily.In recent years,research shows that the mixing model such as GARCH-MIDAS can decompose stock market volatility into long-term components and short-term fluctuations,which provides a new perspective for analyzing the influence of policy factors on stock market volatility.Therefore,this paper first classifies the collected policies,then calculates the policy intensity of each policy,and analyzes the impact of different policies on stock market volatility from both theoretical and empirical aspects.The study found:Frist,the empirical results show that the “policy effect” phenomenon of China's stock market is real,and the GARCH-MIDAS model can well capture the long-term effects of policy factors on stock market volatility.The release of the policy will have a lasting impact on the stock market,but the impact of different types of policies on the stock market and its impact will vary over time.In addition,through the out-of-sample prediction analysis,it can be found that adding the policy variables to the benchmark GARCH-MIDAS model can effectively improve the prediction accuracy of the model.Second,the stock market policy generally reduces the long-term component of stock market volatility.Specifically,the stock capital supply policy,market laws and regulations,and market supervision are effective in reducing the long-term component of stock market volatility.The regulatory authorities should continue to introduce domestic and foreign institutional investors to strengthen market system construction,and To ensure that "there is a law to follow,law enforcement must be strict" to ensure the healthy and stable development of China's stock market.The stock supply policy and the market trading rules and regulations have not generally worked well.As an important way for the capital market to serve the real economy,stock supply should not be frequently restricted in order to maintain the current price level of the market.It is suggested that the regulatory authorities should continue to promote the reform of the registration system and improve the stock delisting mechanism in the future.The overall quality of the listed company.However,the market trading rules and systems have a complicated impact on the market.Some mature trading systems in the West have not achieved good results in China.Therefore,the regulatory authorities should be more cautious when issuing such policies.Third,macroeconomic policies have generally increased the long-term component of stock market volatility.From a policy intensity perspective,the central bank's monetary policy does not have a significant impact on the long-term component of stock market volatility,while the tax policy increases the long-term component of stock market volatility.As a result of the tax policy subdivision study,the loose tax policy significantly increases the long-term component of volatility,while the strict tax policy has no significant impact on the long-term component of stock market volatility.More caution should be exercised when adjusting related policies.