Empirical Analysis On Yield Of Shanghai Stock Market By ARCH Model

Volatility is the most basic characteristic of stock research, which can reflect stock changes. It influenced by political, economic, financial, monetary, as well as the company itself and the impact of market conditions and other factors. A mature and stable stock market tends to show moderate volatility. China’s share price volatility, however, shows complexity and unpredictability, and fails to properly reflect the intrinsic value of listed company, which has affected capital assignments of stock markets. It means we need to study stock prices and yields so as to help investors have a deeper understanding of stock market, avoid risks, and invest in a reasonable way.According to traditional statistical models, variances of financial time series are assumed the same, but they, in reality, change over time, sometimes fiercely or gently, that is, clustering. The early 80, Engle invented Autoregressive conditional the ARCH models, which fits the volatility of financial time series variation. Based on ARCH,at the moment, the academia has offered a variety of models such as GARCH, ARCH-M, TARCH, EGARCH and so on.The paper tries to analyses the volatility in yield of China’s stock market on the basis of the sample data from China’s Shanghai stock market indexes during the past ten years since the split reform of share structure in 2006. The author has tried to not only establish an ARCH model family, but divide the time series of Shanghai composite index into five stages, and built with the ARCH model. Then the paper focuses on the study of "asymmetric", that is, the leverage effect of "bad news" and "good news" on China’s stock market after analyzing the Shanghai stock market. Finally, according to the regression results of models, the author has conducted an analyze on Shanghai stock market and drawn conclusions.