Analysis Of Chinese And US Stock Market Returns And Volatility Based On Economic Cycle

With the development of economic globalization,capital flows around the world,and information is also spreading globally.The linkage among the stock markets in various countries and regions has become a hot issue for scholars,especially the spillover effect between China and the US,the two largest economies in the world.The study and comparison of stock market returns and risk between the two countries are of great significance.Firstly,the relationship among various countries' stock markets is reviewed in this paper.The data is the closing price and returns of CSI300 and S&P500 from April 8,2005 to June 30,2017 in this paper.After stripping out the non-overlapping data,the paper obtains 2877 sets of daily data,572 sets of weekly data and 135 sets of monthly data.Secondly,based on the theory of economic cycle,the paper divides the data into three phases,namely prosperous,systolic and recovery period.The paper analyze the returns and risk of Chinese and the US stock markets in the three phrases respectively.The statistical description of Chinese and the US stock markets include the concentration trend,the dispersion degree,the skewness and kurtosis of returns in the time span of day,week and month.It also includes the correlation between the returns of Chinese and the US stock markets.The results show that the average returns of Chinese stock market with different time span are greater than that of the US stock market in the phase of prosperous and recovery.And the average of Chinese stock market loss in the systolic period is also greater than the US stock market.The volatility of the Chinese stock market is greater than that of the US stock market in the three period.With the increase of the time span,the average income of Chinese and the US stock market is getting larger,the fluctuation range of the returns is also getting larger.The daily returns of both Chinese and the US stock markets have the characteristics of leftbias and leptokurtosis,and these characteristics of the US stock market are more obvious than that of Chinese stock market.The correlation between Chinese and the US stock markets is different in three phase.In the prosperous period,the correlation between is the weakest.The direction of the contraction is not fixed in the systolic period.Thirdly,the ARMA models are constructed respectively for the daily return data of Chinese and the US stock markets in three phase.The paper uses the residual of these models to interpret the unexplained volatility in Chinese and the US stock markets.The results show that the overall risk of Chinese stock market is greater than the US stock market.During the three period,there are of great difference in volatility that cannot be explained by models between Chinese and the US stock market.In both countries,the risk in systolic period is greater than the prosperous and recovery period.That is to say,the volatility of stock returns in China and the US become bigger during the financial crisis.Fourthly,this paper builds the EGARCH model for the phenomenon that the negative impact on the stock market may be greater than the positive impact of the good news.It is verified that there is a significant leverage effect in the stock market of China and the US.The comparison also shows that the leverage effect of the US stock market is larger than that of Chinese stock market,and the leverage effect of the recovery period is larger than that of other periods.This is mainly because the shortselling mechanism in the US stock market is better than the Chinese stock market.Last but not least,the above results have been discussed.In addition,the paper put forward the future researches.