Construction Of SV-MAE Model And Its Application In SSEC

It’s of great practical significance to study the volatility characteristics of Chinese stock market deeply. Stochastic volatility(SV) model is often used to describe the volatility characteristics of stock market. Noting that some scholars have already introduced macroeconomic factors into other financial models, in order to make the model more accurate to describe the volatility of the stock market, this paper tries to introduce some macroeconomic factors into the SV model, and construct a model called SV-MAE. For estimating the parameters, the Markov Chain Monte Carlo(MCMC)algorithm of SV-MAE model is also designed.In the empirical part, the monthly return data of SSEC from March 2008 to September 2015 were modeled and analyzed by using the standard SV model and SV-MAE model. By the comparison between the DIC value of the standard SV model and that of SV-MAE model, The SV-MAE model is found better than the standard SV model. This also shows that introducing macroeconomic factors into the SV model is meaningful.