Research On Chinese Volatilities Of Stock Returns By GARCH Model

After entering the WTO, China has its financial market gradually open up, and the stock market, as a cornerstone of the nation's economy,rises to a more prominent position. Thus, the stock return, widely knownas a fundamental concept of financial theories and a direct index to appraise investment practices,has attracted more attention.Especially, the financial institutions in China are experiencing the change that they lose the support form the country. So the monetary market and the capital will appear the unusual volatility. In this special period, it is a real challenge that we never faced before. To improve our competing ability in the finance market and the ability of enduring the risk, we must learn how to find the risk immediately and how to measure the risk and forecast it. By this, we could keep the country safe in finance. The purpose of this paper is giving a good method to describe the volatility and measure the risk by analyzing the GARCH models. In this paper, I regard Shanghai stock composite price index and Shenzhen Sub-component Index as the main study object, and use the GARCH models to describe the statistic character in two stages with the statistic software EViews 5.1. My results show that there are significantly volatility, excess kurtosis and heteroskedasticity, persistence and asymmetric effect in Chinese Stock Market. There is a positive relationship between price returns and risks.This paper is divided into six chapters.Chapter 1 is a exordium with a brief Introduce of the researching background, make a review on the studies of stock market volatility by both foreign and domestic researchers, explains that the main purpose of this paper.Chapter 2 introduce ARCH model originated by Engle, GARCH model,asymmetric GARCH model involves TARCH model and EARCH model.Chapter 3 describe the basic statistic characters of the data.Chapter 4 is the most important part of this paper. In this chapter I regard Shanghai stock composite price index and Shenzhen Sub-component Index as themain study object, take a sample of the daily closing price from January 4 1997 to December 31 2008 to study the volatility with GARCH model. I divided the whole time series into two stages. theoretical models for time series ,such as GARCH, EGARCH, TARCH and GARCH-in mean ,and the methods of parameter estimation are introduced. Chapter 5 is the advice of stock market based on pertinence analysisChapter 6 is the conclusion of the whole paper.