Chinese Stock Market Industry Volatility Spillover Effects

The volatility spillover effect is one of main characteristics in the stock market, which is researched many years in domestic and foreign. Looked from the literature, the researcher mostly pays attention to the volatility spillover between the regions and pays little attention to the volatility spillover in the market interior. In fact, there has the close relationship in the deferent stocks. The deferent stocks form the specific mechanism of the volatility spillover. Especially in Chinese emerging market investors are dominated by the government policies and prone to form an isomorphic anticipation. This strengthens the dynamic transmission mechanism of the volatility spillover. So, it is important to know the mechanism of the volatility spillover effects in the China Stock market.First part as preface elaborates the selected topic significance, concept definition and research goal and article structure; the second narrates domestic and foreign literature about the research question; Third part introduces application theory.Under qualitative and static situation, applied the Grange causal relation theory and the pulse response function theoretical, fourth part analysis the volatility transmission relates among the composite index, the public index, the commercial index, the industry index and the real estate index in the Shanhai stock market. The empirical study indicated: there has a remarkable volatility co-movement among the five indexes, but its own volatility independence is also strong. The influence of Innovation may last generally to 30 day about.Under quantitative and dynamic situation, Fifth part applies multi-dimensional GARCH model and analyzes empirically volatility spillover effect among the five indexes. In the model application, tested model coefficient non-linear restraint difficult, this article carry on the likelihood ratio test and the Wald test to the matrix element and not to the element non-linear combination. Under this kind of hypothesis test, the model may estimate volatility spillover effect quantity size as well as the information transmission way. And empirical study indicated: the composite index has the one-way volatility spillover effect to other four indices, but volatility spillover quantity very is small. Between the commercial index and the public index, the industry index and the commercial index, the commercial index and the real estate index, the real estate index and the industry index have the bi-directional volatility spillover effect, in which industry index are biggest to the real estate index volatility spillover effect.Last part is a conclusion, and the application of behavior finance has carried on the simple explanation to the volatility spillover effect.With development of the Chinese stock market, the stock price to information reflection can be more rapid and more accurate. Although volatility transmission mechanism and volatility spillover size can appear some changes, the methods in the paper are still useful.