The Characteristics Of The Chinese Stock Market Jump Behavior Under Major Events

Rates of returns in stock market usually volatile to some extent. Once animportant or abnormal news releases in the market, the returns will become turbulentand volatile to great extent, and will follow jumping process. This is very bad forinvestors, risk management and departments, policy decision department, thesituation may even lead to serious economic losses, Companybankruptcy, sluggishmarket and many other hazards. Therefore, studying the influence of major events onthe Chinese stock markets can improve the risk management leve of financialinstitutions and risk management departments, timely and effective risk control andprevention, and provide the financial supervision department a practical guide ofmaking relevant policy.Since unexpected events may lead to market volatility, leading to economies ofserious losses, The paper raised several issues: When major events occur? Do jumpshappen in the Chinese stock market? What are the corresponding relation of Jumpsand major events? What are the features of these jump and volatility?Based on the above issues, this paper examined the existence of the time-varying,long-term memory and jump. The model which taking into these characteristics of themarket account will be more close to reality, practical value will be higher. It alsoovercomes two disadvantages of the existing related literature: First, These modelsonly consider jump or volatility,and studying the composite behavior of threecharacteristics is a blank. Second, the significant events of Chinese stock market don’thave systematic studying. The literature discussed the corresponding relation of jumpsand major events over a decade, It shows that it is necessary to study the influence ofmajor events on the Chinese stock markets. Meanwhile the paper classified theoccurrence of major events,There are mainly political events, policy events, economicand natural disasters events, Then in terms of the posterior probability of jump, jumpintensity, the mean of jump size, It studied the lag period of jump characteristics, Thefrequency and amplitude of jump. In order to illustrate the characteristics of market volatility, the article discussed the long-term market volatility and short-term durationand impact of the major events. Studies have shown that different types of majorevents vary, even the similar type events. For the investor or investment institutions,financial risk management, policy-makers, supervision department, they can set upappropriate mechanisms to achieve early warning, measurement andpost-management based on the influence of historical events, then the market riskcan be beared in the effective range.