Study Of Affecting Factors Of Volatility In China’s Stock Market Using GARCH-VAR Model

It’s not uncommon to see a group of practitioners in financial industry and academic researchers attach importance to stock market volatility and its relevant influencing factors.While the stock crash which happened in the second half of 2015 significantly makes this subject lofty and urgent.The real wor-ld practices repeatedly make sure that the abnormal volatility in stock market can not only wipes out the wealth of most of people but also transmits to the real sectors and triggers systemic risk that can be detrimental to the macro stability and prosperity,which is exactly opposite from the viewpoints of stock market neutrality held by some econom,ists.It is,therefore,necessary to have an in-depth study on stock market volatility and its affecting factors under the background of "New Normal""Stock Crash" "Strict Supervision" "overall opening-up in financial sector".In a word,in view of past and guide to the future!In this paper,selection range of HS300 representative of A Stock market,which is from WIND database,is from 2002/1/4 to 2017/7/5,and totally 3758 observations.GARCH model is used to research the volatility,Hurst is used to measure long memory and Kupiec&Christoffersen test are used to backtesting;Then Pearson,Kendall,Spearman correlations and Granger test are used to have analysis on relations and affecting factors b,etween HS300 index and global stock market(including FSA50,HSI,NIKKEI225,S&P500);Finally,monthly data amount to 65 observations ranged from 2012/1 to 2017/5 is selected to study the impacts variables including economic growth,leverage,investor sentiment,cross-border cash flow and monetary policy have on HS300 volatility using VAR model.The results are displayed as follows:①It’s absolutely true that china’s stock market exhibits leptokurtosis,leverage effect,volatility clustering,long memory,and the EGARCH model can best fit the selected data as well as pass backtesting at 95%confidence level;②FSA50 has the most powerful relations among variables with HS300;but can only pass granger test at one side,while HIS can pass granger test at both sides;?Investor sentiment and leverage are major drivers of stock market volatility and herd behavior,the phenomenon of which we’ve already noticed in domestic market daily routine and is consistent with abnormal volatility in the second half of 2015.