Based On GARCH Family Models For Study Of The Asymmetric Volatility Of Shanghai And Shenzhen Stock Markets

The volatility of the stock market is not only an important indicator of the development efficiency and quality of the stock market, but also an important area of the finance empirical research in recent years. Stock market volatility prevailing volatility clustering, volatility asymmetry, peak and fat tail distributions, volatility persistence and other features.The volatility asymmetry of the stock market is the focus of the research at home and abroad, and its meaning is that the good news and bad news have different manifestations on the impact of the stock market volatility at the same level. A large number of empirical studies have shown that mature foreign stock markets exist significant volatility asymmetry phenomenon, and manifested as "leverage effect", that is the impact of bad news on the stock market volatility is greater than the good news in the same degree. However, the development of China’s stock market is relatively late, for example, imperfect market trading mechanism, a low degree of rational investors, darker atmosphere of speculation, significant impact of government policies, high fluctuation frequency and large fluctuations of stock price, weak efficient market and so on. Compared with foreign mature stock market, China’s stock market showed higher complexity and unpredictability. Therefore, the research of our stock market volatility asymmetry has important theoretical and practical significance.In20years development history of China’s stock market, the impact of policies on stock market volatility is relatively obvious. Since the share reform in May2005, China’s stock market experienced an period of unprecedented bull market and bear market. Therefore, we selected the closing price of the Shanghai and Shenzhen stock market as study sample since the share reform, and took the gain rate of the Shanghai and Shenzhen stock market as the research object, and according to the highest point and the lowest point of the Shanghai and Shenzhen stock markets, we divided the sample data into three stages of a bull market, a bear market and a mixed volatility stage. Meanwhile, we integrated use of the descriptive statistics method and empirical analysis method on GARCH family models, to study the basic volatility characteristics and the asymmetric volatility phenomenon of the Shanghai and Shenzhen stock markets since the share reform.In the descriptive statistical analysis, we had a comprehensive analysis of the basic volatility characteristics of the Shanghai Composite Index and Shenzhen Component Index through horizontal and vertical comparison. In the horizontal international comparative analysis, we introduced Nasdaq index, German DAX index, Nikkei225index, Hong Kong’s Hang Seng Index over the same period as the reference to take a comparative analysis. In the vertical comparative analysis, we took a comparative analysis of the basic volatility features of the Shanghai Composite Index and Shenzhen Component Index in the various stages, in order to explore the changes in volatylity. Analysis indicators include the mean, standard deviation skewness, kurtosis, and JB test values. The empirical results show that:the volatility characteristics of China’s stock market in the various stages showed some similarities with several major international indices, that is the Shanghai Composite Index and Shenzhen Component Index showed a significant volatility clustering, non-normal distribution, peak and fat tail characteristics in the various stages, indicating that the sample sequences of the various stages of Shanghai Composite Index and Shenzhen Component Index may exist asymmetric volatility phenomenon, and further empirical analysis should be done with GARCH family models. Meanwhile, the sample sequences of the various stages of Shanghai Composite Index and Shenzhen Component Index also showed their own unique volatility characteristics, suggesting that the need for a phased comparative study on Shanghai and Shenzhen stock market.In the empirical analysis, we mainly use GARCH model, TARCH model, EGARCH model and the curve of information impact, to detailed analyze the asymmetric volatility phenomenon of the daily yield sequences of the Shanghai and Shenzhen stock index. Before modeling analysis, we first need to make a series of applicability test with the daily yield sequences of the Shanghai and Shenzhen stock index, such as stationary test, autocorrelation test, ARCH effect test and so on. In order to further determine whether the the daily yield sequences of the Shanghai and Shenzhen stock index are suitable for the establishment of GARCH Models. Test results showed that:the sample data of Shanghai and Shenzhen stock index in stages are random stationary time series, and the residual series of ARMA models of Shanghai and Shenzhen stock index exist ARCH effects, that the condition heteroskedasticity. Therefore, the daily yield sequences of the overall and the various stages of the Shanghai and Shenzhen stock index are suitable for the establishment of the GARCH family models. After the establishment of GARCH family models, by contrast we found, EGARCH model is more suitable to test the volatility asymmetry phenomenon of the Shanghai and Shenzhen stock markets.In addition, we also concluded:the daily yield sequences of the Shanghai and Shenzhen stock index in general there is a significant asymmetric volatility effect, and manifested as leverage effect, which is consistent with the performance of foreign mature stock market, indicating that the development of China’s stock market has been made great progress. However, in the phased modeling analysis process, we found that the volatility asymmetry of the Shanghai and Shenzhen stock index showed stage characteristics, that the impact of good news and bad news have different manifestations on the volatility of the Shanghai and Shenzhen stock index at different stages. Specifically, in the bull market stage, the volatility of the daily yield sequences of the Shanghai and Shenzhen stock index manifested as significant volatility anti-leverage effect, while in the bear market and mixed fluctuation stages, the volatility of the daily yield sequences appeared as significant leverage effect.It can be seen from the descriptive statistical analysis and empirical analysis results, the development of China’s Shanghai and Shenzhen stock market is to be more and more mature, and show more similarities with foreign mature stock markets. China’s stock market, however there are still many issues, such as the problems of the stock market system, investors’ own problems, and so on. This requires the concerted efforts of all sectors of society to promote further improvement of China’s stock market.