Volatility Analysis Of Shenzhen Stock Price

China stock market is very sensitive to external stimuli, and its volatility will reflect on the stock price. So, the research on the volatility of the stock price is meaningful to ensure the healthy development of the stock market, to grasp the pulse of our stock market accurately, to establish a comprehensive regulatory mechanism. Based on the daily closing price of the Shenzhen Composite Index, we study the change of return and volatility by parametric and nonparametric methods.The time span of the sample is from January 2, 2001 to December 31, 2010. We divide them into two samples and use parametric methods to fit and predict. Inside the sample period, we build ARMA-PARCH-M model based on the model of PARCH and GARCH-M. The fitting result shows that ARMA(3,3)-PARCH(1,1)-M model is the best one compared with other GARCH modles under several different standards. Outside the sample period, ARMA-EGARCH-M is the best for prediction.At the same time, we use non-parametric method to analyze return and volatility of the Shenzhen Composite Index. Our results support the conclusion that the return distribution has a peak and a fat tail. The stock market has the same feature of non-symmetry like the mature markets. Moreover, our stock market never get rid of the fact of"Policy Market", the stock price is unstable due to the policy changes.