Duration Dependence Of The Fluctuation In China’s Stock Market

After more than20years of development, Chinese stock market has been formed with the economic development of our country to adapt to the characteristics of road, both the independence and the stability of the Chinese stock market is also on the increase apparently, although the stock market scale is growing, investment company is on the increase the institutional construction is increased perfectly, but compared with western countries,the immaturity of Chinese stock market is there for all to see. Although China’s economic growth has slowdown in recent years, but duration the financial sub-prime mortgage credit crisis in the global economy in2007, Chinese economic has belongs to outshine others, but in recent four years, our country stock market can be said to be "bear a crown of the world". Now in our country is still in the transformational period from the planned economy system to market economic system, social economic behavior and the performance of the developed market economies is six to one. Therefore, in order to further improve the overall operation of China’s stock market,make our country stock market stable, healthy and development, it will be necessary to understand the stock market cycle fully, at the same time, rely on reasonable effectively policy supporting macroeconomic regulation and control.It has been often heard the point of view stock price rise up for a long time will fall, but fall such a long time won’t rise in the stock market". wherever, up from data confirmed that the transformational probability turn from a bear (bull) market into a bull (bear) market in the stock market cycle whether really is related with the duration in the current state, you also need to build a model based on duration dependence characteristics of the Markov switching vector auto-regressive model (DDMS-VAR). So-called duration dependent characteristics, refers to an event in a state of the termination probability depends on the state has been duration, for the stock market, it is the stock market in a bull market or bear market phase termination probability depends on the stock market has been duration in the stage of time. Specifically, positive duration dependence characteristics means that from the bull market to bear market transformation probability will increases along with the duration of the stock market in a bull market, whereas transition probability is inversely proportional to the duration in the bull market, so does bear market into a bull market. Correctly grasp the development of Chinese stock market volatility and the change rule, in a timely manner to reveal the vudlerability of China’s stock market, in order to avoid the disadvantages of stock market gravely deviates from the normal track, which adapt to the development of the stock market the overall development of the socialist economic system has important practical significance.On the choice of the data, this paper argues that the Shenzhen index and Shanghai index as an important reference index of the stock market in our country, in a timely manner, they are sensitive to reflect the fluctuation of the stock market, that is a barometer of Chinese stock market changes. In view of the Shanghai index and Shenzhen index, between the two indexes is a high degree of consistency. Wherever considering that the Shanghai composite stock price volatility is larger, and compared with the Shenzhen index.Shanghai index has a stronger speculative, in view of these reasons in this paper, we think that only using the Shenzhen monthly index closing price based on DDMS model to do empirical analysis, the results are confirmed that the Chinese stock market is significant in the bull market phase duration dependence, and in the duration of the bear market phase dependence is very weak, this paper argues that there is no duration dependence in bear market phase; Secondly, drawing lessons from Victor Castro (2013) to test for robustness DDMS model, we will join China’s macroeconomic leading indicators and the US dollar index in DDMS model for robustness test, the empirical analysis shows that joined the leading indicators of DDMS model compared with the original model is still a very similar model, both them have a weak impact on the transition probability from bull stock market to bear stock market, but transition probability of the bear market into a bull market is not significantly affected. Finally considering the more and more mainland enterprises have chose listed in Hong Kong, the Hengsheng index is an important index of the Hong Kong stock market cycle fluctuations.this paper argues that it is necessary to analyze the duration dependence of the Hong Kong stock market. Based on analysis of Hong Kong’s Hengsheng index in DDMS model, the empirical results show that the Hong Kong stock market in a bull market and bear market have significant duration dependence, the Hong Kong stock market maturity, mechanism of sanity are inseparable. In order to estimate model parameters, we will use Bayesian Gibbs sampling estimation, its essence is a Markov chain Monte Carlo simulation method, it can accurately simulate the all unknown parameters in the model.In conclusion, the duration of the correct analysis of Chinese stock market depend on the characteristics of deep understanding and the understanding the characteristics of the Chinese stock market cycle, accurately grasp the market in a bear market and bull market phase as much as possible the last time as well as the turning point in the length of time, correct judgment will help the government macroeconomic situation, and take timely macroeconomic regulation and control meas. For example,when our country stock market volatility is more than a certain degree, and show the irrational rise and fall, governments and regulators must attach importance to it, timely and reasonable policy measures, timely and stable price, avoid price further development in irregular form, in order to avoid the existence of the crisis in our country stock market basis and have systemic financial risks.