It Is Based On That Analysis Of The Volatility Spillover Effect About Shanghai Securities Composite Index And Compositional Index Of Shenzhen Stock Market Under The Bull And Bear Market

The stock market in China had remained steady since the crash that lasting from 2007 to 2008.In 2015,led by the slogan “Reforming Bull Market” and “National Bull Market”,the stock market in China entered into a new round of Bull Market.However,the climbing did not last long.The stock price maximized on June 12,2015,and then the stock faced a fierce drop.Both professional investment organizations and individual investors suffered tremendous financial loss from this financial crash.Based on the context described above,this paper conducted further research on fluctuation between Shanghai securities composite index and Compositional Index of Shenzhen Stock Market.To begin with,the research focused on daily closing prices of Shanghai Index and Shenzhen Index and analyzed the overall volatility spillover relations between these two markets over the years.Then the research targeted at the volatility spillover relations between these two indexes under Bull Market and Bear Market two different trends.A quantitative research was conducted by applying VECH-GARCH,DCC-GARCH and BEKK-MVGARCH models to the volatility spillover relations between Shanghai Index and Shenzhen Index.The research will collect the high-frequency data within five minutes.The results of the quantitative research are following.First of all,by applying stationary test,co-integration test and Granger causality test to examine the data,it turns out that no matter under the general market,Bull Market or Bear Market,closing prices of Shanghai Index and Shenzhen Index are integrated processes.Meanwhile according to the results of Granger causality test,bidirectional causality exists between two indexes.In addition,according to the results of applying DCC-GARCH and VECH-GARCH models to analyze the volatilities and correlations between two indexes,no matter under the Bull Market of Bear Market or the general market,there is a strong correlation between Shanghai index and Shenzhen Index.Shanghai Index and Shenzhen together build a strong linkage mechanism.Finally,relying on the results of applying BEKK-GARCH model to analyze the volatility spillover relations between two indexes,it turns out that,in general,there is a significant bidirectional volatility spillover effect existing between Shanghai and Shenzhen markets.Though under the influence of Bull Market,the research examined bidirectional causality between Shanghai and Shenzhen by Granger causality test,Shanghai Index's volatility spillover effect on Shenzhen Index remains dominating.Under the influence of Bear Market,the correlation between the two indexes enhances.Shanghai Index has strong volatility spillover effect on Shenzhen Index.At the same time,Shenzhen Index has a significant volatility spillover effect on Shanghai Index as well.Eventually,the paper offered suggestions and recommendations regarding to regulate the optional mechanism of stock market,build risk protect system,raise investor's awareness of risk protection and improve investors' overall capabilities.