An Empirical Study On Market Risk Of China’s GEM Market Based On Garch Model And Va R Method

The global GEM Market starts from 1960 s. The first stage is from 1970 s to the middle of 1990 s, and the second stage is from the middle of 1990 s till now. After two stages of development, there are more than 40 GEM Markets except some closed markets. The GEM Market start later in China. On 23 rd September 2009, the GEM Market held opening ceremony in Shenzhen. There are 28 companies listed on the GEM Market on October 30 th. Then the GEM Market has a high speed of development. By the end of 30 th October 2013, the number of listing corporation has rapidly expanded to 355. The quantity and the total value are increasing rapidly. There are also some issues need to deal, such as the “three high” phenomenon. Besides, the Main Board Market has strict listing standards, the GEM Market provides financing and capital operation places for some emerging enterprises. These enterprises have short opening time and small scale, but they have strong financing demand. They also have high uncertainty and risk. All this means that the GEM market may has high risk, in order to standardize the GEM Markey, and build orderly trading environment, we should carry on effective management on the risks of the GEM market. This can promote the GEM market more healthy, efficient and stable, at the same time, promote the prosperity and development of China’s financial industry.Because of the important practical significance of the risk management, we should firstly identify the risks. According to different classification criteria and methods, the risks of the GEM market have different classification. In terms of the scope, the financial market risks are divided into systematic risk and non-systematic risk. According to the causes, the risks are divided into market risk, credit risk, liquidity risk and operation risk. With the further research on market risk, some researches on volatility risk and correlation risk appear. Because the stock price data can be obtained easily, and the amount of the data is large, the market risk can be quantified. The market risk is mainly from the price volatility, therefore, to estimate the market risk is to analyze stock price volatility, that is analyze the volatility risk of the GEM market. In this context, this article research and analyze the volatility risk of China’s GEM market, in order to provide some data reference for the risk management work, and to assist to develop a better risk management plan.The GARCH model can be used to measure and estimate the risk of the financial market. This paper selects the daily closing price of the China’s GEM market composite index as the research object, and uses the logarithmic rate of return of the GEM index to establish the GARCH model. Based on this model, we can estimate the fluctuation ratio, and then calculate the VaR. This article use Eviews to carries quantitative analysis on the market risk of Chinese GEM Market. It also uses the Shanghai and Shenzhen 300 index as the evaluation index of the main board market. And do some comparisons between the GEM Market and the main board market. Finally it finds some measures to deal with the risk of the GEM Market, to promote the orderly development of the Chinese GEM Market.