Research On The Relationship Between The Stock Matket Size And Market Volatility

With the increasing development of China’s stock market and the increasingly mature, the stock market is constantly expanding, but the stability of the stock market is facing a growing challenge. The frequent and intense price fluctuations make more and more investors away. Therefore, the risk control of the stock market has become increasingly important to maintain the stability of the market. After years of observation and study in the theorists and practitioners, stock market size and market volatility are closely related. Among a great number of factors affected the volatility, some factors contribute a lot to the volatility of stock market. Some fluctuations in the market promote the expansion of the scale of the stock market, but the frequent fluctuations have the opposite effect.First, based on the comparison and analysis on the four perspectives of economic development, policy factors, risk factors, supply and demand balance principle, we illustrate the link between the stock market size and market volatility from a theoretical point of view; then in the broad stock market definition, select five comprehensive and meaningful indicators, which are the total market value, the total share capital, the total number of listed companies, the total number of listed stocks and account number. This article analyze the change and development trend of China’s stock market in recent ten years based on the analysis of the five indicators by the statistical description of the method, and then make an empirical study of the yield on the Shanghai stock market volatility using EGARCH asymmetric model, then analyze the characteristics of the market volatility; Finally, select the VAR model to analyze the relationship between the stock market size and market volatility.According the empirical study’s results we find, expansion markets will affect the volatility of the stock market to a certain extent, among the five indicators selected, the total market value, the total number of listed companies and the account number is particularly attributed to the volatility of the stock market. At the same time, market volatility to some extent is also affected the changes of the size about the stock market. Then further analyze the reason of relationship between the market volatility and the market size from macroeconomic factors and micro factors of the stock market on the basis of the empirical results. Finally, on the basis of the empirical results and causes analysis, make policy recommendations from the respects of China’s stock market’s operators mechanisms, legal supervision, the behavior of market participants and government reasonable positioning to further promote stability between the scale of China’s stock market and the stock market, and coordinate the development of them.