Analysis Of The Volatility Of Chinese Stock Market Based On Theories Of Microstructures

A key criterion to evaluate the maturity of a stock market is to see whether it has good volatility. Volatility is main representation of the uncertainty and risk of stock market and is the core factor in determining the stock price and in structuring securities portfolio. Furthermore, volatility is closely related to other factors that represent the quality and efficiency of stock market, such as liquidity and transaction cost, so it is one of the most precise and efficient factor to represent the behavior, quality and efficiency of stock market. Additionally, volatility has a tremendous influence on the investment strategy, financial lever and management policy of enterprises, the consumption and investment of individuals, as well as economic circles and related macroeconomic variables.The study on the volatility of stock market has been the hotspot of financial research for a long time. This thesis is based on the theories of financial market microstructure and researches on the volatility of Chinese stock market qualitatively and quantitatively. Statistical methods and financial econometrics are widely used in this thesis. The conclusion establishes foundation for the consummation of trading mechanism, the standardization of trading behaviors and the decreasing of market risk of Chinese stock market. The thesis is divided into three parts. The first part is the theories of financial market microstructure and theories of volatility, which includes the first and second chapters. The second part is an analysis of stock market volatility based on theories of microstructure, which includes the third to sixth chapters. The last part is the conclusions of the above two parts and the suggestions for policy. The following are the details:The first part: the first chapter deals with the origin, developing phases, objectives and lately publications of the theories of financial market microstructure. The first chapter also illustrates the importance of the research on the volatility of Chinese stock market. The second chapter tells about the definition, measurement and estimation of volatility. Several factors that affect the long-range and short-range volatility are discussed qualitatively.The second part: the third chapter deals with the influence of after-break trades and continuous trades on intraday volatility, and the influence of call auction and continuous auction on the opening and closing price volatility. The fourth chapter explains the relationship between stock returns and volumes. It also points out the speculative trades and risk-sharing trades are the determining factors for the regressive features of return series. The fifth chapter discusses the influence of five microstructure variables on the volatility clustering. The chapter also mentions the influence of price limits on volatility. The sixth chapter analyzes the different effect of predictable and unpredictable volume and volatility to bid-ask spread. The third part: the seventh chapter is the conclusions of the whole thesis with several suggestions for developing Chinese stock market.