An Empirical Analysis On The Volatility Of Stock Market And The Relationship With Economy In China

A key criterion to evaluate the maturity of a stock market is to see whether it has good volatility. Volatility is the core factor in determining the stock price and in structuring securities portfolio,which is important to represent the market behavior and has been the hotspot study of financial research. Stock market is the important part of the total national economy, which develops in it and also serves it. Stock market volatility has closed relationship with macroeconomic volatility, but it has its own characteristic rule because stock market is a relative independent market. So in reality, stock market volatility reflecting macroeconomic volatility has its own characteristic, therefore it may appear the inconsistent situation of them.In nowadays, stock market becomes more perfect, so it is necessary to study on the volatility of stock market and economic volatility, then finds a real relation between them. The thesis is divided into three parts. The first part is the theories of volatility, which includes the first and second chapters. The second part is an analysis of stock market volatility characteristics and the relationship with economic volatility based on theories of the first part, which includes the third and forth chapters. The last is the conclusions of the above two parts and suggestions for policy.The sample used to study on the stock market volatility characteristics, almost contained the whole developing stage of China stock market, from 1993 till end of June 2007. According to the creation time of two important business regulations, this paper divided the entire sample into three and then applied the GARCHs model to analyze respectively with corresponding conclusions.This paper adopted an economic prosperity exponent rather than GDP growth rate. The lagging exponent, leading exponent, consistent exponent were carried out comparatively, and finally the consistent exponent were chosen. In the empirical analysis between stock market and economic volatility, the Impulse Response Function were used to make dynamic response analysis, The result showed that, in the short term,there were certain deviations between the two volatility. Then, this paper mainly discussed the possible reasons for the deviations. At last, some suggestions in the point of listed companies, administration authorities and invertors were given.