Research On Industries Relativity Based On Markov Regime Switching Model And Advise To Portfolio

In recent years,most of theories,such as volatility and relativity and optimal portfolio selection are being improved,by the developing of stock market.For researching volatility and relativity of stock market,this paper construct GARCH(1,1)model with normal distribution,general error distribution and skewness general error distribution,based on ShangHai industries index.Then construct MS-GARCH model,and find that there are two state which is high volatility state and low volatility state in the industries index and the expected duration of low volatility state is longer than high volatility state.Comparing the model finds that fitting effect of the GARCH model with skewness distribution is better than other distribution;For describing the volatility,the MS-GARCH model is better goodness of fitting than the GARCH model.After,this paper calculate the relativity of industries index with common state,low volatility state and high volatility state,take Energy as an example,result shows that it is high relativity in sample duration and highest relativity during 2015 to 2016 but low relativity in low volatility satate and high volatility state.In the last,this paper construct Mean-Variance model and calculate the efficient frontier,finds that according to increase or reduce the weight of telecommunications can influence the return of portfolio immediately.Above all,ShangHai industries index with the features of high volatility and high relativity.Therefore,we must pay attention to the change of returns and relevant information of stock market.