China Stock Market Volatility Behavior Analysis Based On Concept Of Long Memory

This paper used long memory theory to take a thorough empirical study on China stock market volatility. In recent years, the global stock markets become more and more volatile and had a negative impact on the real economy. It puts forward new requirements on investors and regulators'risk management and prevention. China's stock market is an emerging market. In the 21st century, with the deepening reform and ongoing economic development, many new changes have taken place in China stock market. The further study of the China's stock market volatility statistical characteristics can contribute to a better grasp and understanding of the operational status of the stock market, which is has important practical significance on our stock market development and stability.China has experienced two distinct phases in new century: from 2001 to 2005, the stock prices continued to fall; from 2005 to 2007, the stock market experienced the biggest upward wave since the establishment of stock exchange. In the empirical study, identify the bull and bear phase first then use accurate semi-parametric method to estimate long memory parameter, and comparative studied the efficiency of China's stock market and the volatility states.This paper gives a systematic introduction to the theory of long memory, and point out the prospects of multi-fractal market theory as a supplement. Unlike previous empirical studies of long memory, this paper added the test of true or spurious long memory, and with the help of computer technology, all possible estimate values displayed instead of some conventional values. This whole picture display is not only much more intuitive and accurate, but also provided updated knowledge on the estimation methods self. These amendments ensure the robustness of the results and interpretation is reasonable. The results showed strong evidence of long memory in volatility both stage. In addition, the volatility was more persistent in the bear market than in the bull market. Considering two exchanges, the volatility was more persistent in Shanghai than in Shenzhen, and the difference was more obvious in bull market.This paper explained the results from the perspective of economics and showed some implications in terms of financial policy.