Research On Investment Risk Of The Industry Sector In The Chinese Stock Market

China’s stock market was established lately, but it developed quickly. With the development of the stock market, the stock market’s risk and the relations between industry sectors, became the two important factors affecting the stock investment. So the study of the risk of industry sector and carrying on the comparative analysis are very necessary.In this paper, the moving variance method and GARCH modeling method are used to study the volatility of Shanghai and Shenzhen 300 index and the industry index.On the basis of the results of GARCH model, the Va R values of each industry sectors are calculated.By analyzing the reasons of the differences in each industry sectorsin different periods, we can find China’s stock market is a very obvious "policy market".The policy events, economic events and natural disasters have a great influence on the risk of industry sectors. Then through correlation and conductivity study between industry sectors, investors shouldinvest in different industry sectors which have small correlation coefficient, and invest in different industry sectors according to the Granger Causal relationship.They can get better returns, and control riskreasonable. Finally, through the study and calculatethe Sharpe ratios of different industry sectors, rule can be found.When economic environment is good, industry sectors of high risk can bring higherexcess returns. When the economic environment is bad, the industry sectors which are planned and controlled by the government, or the industry sectors whichare existence of price rigiditywillbring a higher excess returns.