Long Memory Of Volatility In Chinese Stock Market

The long memory of time series array firstly was found by Hurst in 1951.In the recent years,researching on long memory has been expanded to the domain of economics and finance from natural science field. Especially the long memory of financial volatility has became the focus of the study at home and abroad.It is very important to analysis the long memory in stock market. According to the Efficient Market Hypothesis(EMH),if a stock market is efficient,the price of the stock should be random. The price was more random,the efficiency was more obvious. The existence of long memory about capital market strongly challenged EMH. It made the price regular and the classical short memory time series array models useless.What's more,investors could forecast future prices of stock by studying its historical information.As the most important part of Chinese security market, Chinese stock market has developed for almost 20 years,while it is still different from the foreign mature stock market. Therefore, the research of long memory of volatility in China's stock market is of important theoretical and practical significance.This paper firstly reviewes the background and surveyes of long memory of volatility research in the stock market,and then introduces the long memory character's definition,SV model and the method of estimation,Hurst index and R/S analysis . The last part was the long memory of volatility empitical analysis, sums up the whole paper.This paper chooses Shanghai Synthesis index returns and Shenzhen composition index returns as samples,use the method of MCMC to evaluate the parameters in SV models and calculates the Hurst index. The result reveales that the long memory of volatility definetely exist in stockmarkets.