Empirical Analysis Of Volatility Characteristic In China Stock Markets

Volatility is the central of the finance theory. There have been a class of econometric models were built in the field of financial econometrics, such as ARCH-type models. With the development of the technology, the frequency of the financial data has been higher and higher. Does the former models fit the high -frequency data? What the new characteristic of volatility in China stock markets? With these questions we applied the ARCH-type models on the 5-minute frequency stock index data to analysis the characteristic of volatility in China stock markets. We also developed a new ARCH-type model to analysis the relationship between returns and risk. We found that 1) Returns of stock index exhibit intra-day volatility clustering and tend to be series correlated; 2) Returns are more leptokurtic and fatter tail in high frequency data; 3) Higher volatility occurs near the open and close in stock markets and it exhibit an intra-day behavior of volatility; 4) Asymmetric effects of news are found in stock markets and observed as "leverage effect"; 5) Considering "intra-day effect" and "leverage effect", negative relationship was found between excess returns and risk.