A Comparative Study On The Fluctuation Characteristics Of Stock Market Based On ARCH Model Family

Chinese capital market has been established for more than twenty years, whose development pace so very rapid that the total value of our stock market has already ranked the second place all over the world. But compared to the developed markets, China’s stock market is still at the stage of "emerging and transitional", typically character is that its stock price volatility is too large. Especially in the current background of Chinese economic transformation and restructuring, as an economic barometer of the stock market, which would inevitably lead to drastic macroeconomic volatility, so deep study on the capital market, especially on the stock market volatility becomes extremely urgent.Besides the study of Chinese stock market volatility, we need to choose the mature comparative capital market as well. Because only through comparative analysis of relatively efficient stock market volatility can reveal typical features of Chinese stock market volatility, which can help us to objectively judge current development of Chinese capital markets, identifying the gaps between Chinese stock market and the mature ones, thus provide measure experience to improve Chinese capital market.On April 10,2014, China Securities Regulatory Commission and the Securities and Futures Commission of Hong Kong get cooperation to carry out a announcement, which approve Shanghai Stock Exchange and Chinese Securities Depository and Clearing for regulators on behalf of the mainland stock market and to HK Stock Exchange and Hong Kong Securities Clearing Company Limited as the representative of the Hong Kong stock market, to develop a trading each other stock market (hereinafter referred to as "Hong Kong and Shanghai Tong"), designed to promote the mainland and Hong Kong capital markets to get mutual benefit and achieve common prosperity and development.Shanghai and Hong Kong tong is equivalent to the introduction of mainland stock market trading rules and investment philosophy and the gradual integration of Hong Kong stock market, which is an important step in the gradual maturing, effectively opened up our markets investment channels for foreign investors. This marks Chinese stock market began to truly international. Against this backdrop, our research on the volatility characteristics of Chinese mainland and Hong Kong stock markets will have a new meaning.Chinese Hong Kong, (hereinafter referred to as Hong Kong) as one of the world’s international financial center, in Asia, and even in the global capital markets stay on a pivotal position, the change of Hong Kong’s capital market may lead the changes in the world market in a sufficient way, meanwhile, its location endowment even determines close relationships of economy、policy and cultural between Hong Kong and the mainland capital markets. Naturally, Hong Kong stock market has become an ideal research reference of mainland stock market.Therefore, the study of volatility characteristics and interactions between Hong Kong stock market and Chinese mainland stock market can help the majority of market participants objectively and effectively determine the degree of Chinese mainland stock market development, meanwhile, can provide conducive measures for Chinese capital market further improvement and strengthen the efficiency of laws and regulations which has an important practical significance of preventing systemic financial risks.Based on ARCH family models and the logarithm returns of daily data for HS300 stock Index and HK HIS stock Index from 9 May 2005 to 16 February 2014, we made the comparison, the results show that:first, both Chinese inland and HK stock markets face obvious agglomeration effects; second, Chinese inland stock market faces no risk premium effects and the insignificant leverage effects, while the HK stock market’s risk premium is obvious who shows significant leverage effects; third, the HK stock market has a significant one-way spillover effect on Chinese inland stock market. In a word, the efficiency of Chinese inland stock market is comparatively weak, government ought to put forward some specific measures to help costumers cultivate a proper investment consciousness and improve Chinese inland stock market as well.