GARCH-based Empirical Analysis Of Volatility In HSSZHK Index

Hang Sheng Shen Gang(HSSZHK)index which includes 5 industries 100 constituent stocks has been announced in August 25,2015.It's purpose is to reflect the performance of the quoted companies who have benefited from the development of Shenzhen and Hong Kong.What is very worth to be noticed is that this index's constituent stocks are from two capital markets.As the first cross-market index,itself is very valuable to be studied.This paper focused on the area of risk,trying to find a perfect GARCH model to describe the variance of HSSZHK in order to study the volatility of the rate of return.Fist of all,the paper induces the development of GARCH model,at the same time,also make an introduce to the test methods which must be used during the study.Then the paper points out that in the selected sample space,HSSZHK index passes all the tests including ADF test,relevance test and ARCH effect test.And because of no significance relevance to the time series,all the follow-up study should see the mean equation as white noise and use the time series without mean equation.We build a credible GARCH(1,1)model and on this basis trying to build more complex GARCH models.We find out that EGARCH(1,1)model and TGARCH(1,1)model can be a better choice.And these two models reflect an abnormal phenomenon which is different from "leverage effect".During the study,we also get this conclusion increase the order number of the models won't promote the reliable of explanation.Be aimed at the abnormal phenomenon,this paper discusses 3 main index including SSE Composite Index,SZSE Component Index and Hang Seng Index.The conclusion is that the abnormal phenomenon is particular to HSSZHK index but also showed by the index above.Because of the limited of the amount of qualified samples,we have to make further reseARCH on other indexes,such as SSE Composite Index and Hang Seng Index.What must be noticed is that the conclusions getting from other indexes can only give us some clues and inspire.We can never ever see them as certain conclusion when we talk about HSSZHK index.To be specific,we expend the sample space of SSE Composite Index and change the sample space of Hang Seng Index.