Based On Garch Models Of China's Stock Market Volatility And The Linkage Between Empirical Research

The existence and development of stock market bases on volatility. A normal volatility of stock price is prerequisite for investors to get profits, which has a positive effect on the maturity of the securities market and norms. While the abnormal stock price fluctuations will have a negative impact on the stock market. China's stock market is in emerging and transitional stage of development, with its own unique wave characteristics. With the development of our stock market, China's Shanghai and Shenzhen stock market linkage is also gradually increased.This paper selects the Shanghai Composite Index and Shenzhen Component Index as research objects, which have greater influence in China's stock market. The indexes were updated to take the historical data, selecting the January 2,2004 to March 31,2010 at the stock income price data for statistical testing, and using E-views software to establish a family model based on GARCH volatility of the stock market model, finding that the volatility of the stock market has a strong sustainability by empirical study. When the impact of stock returning in the event of unusual volatility in a short term is difficult to remove, and stock price volatility leverage effect is obvious, bad news of the stock market has bigger impact than the same amount of good news. Then as to the Shenzhen Component Index and the Shanghai Composite Index, by the usage of cointegration, Granger causality test, impulse response function, variance decomposition of the empirical analysis, it concludes that there is one-way Granger causality between the Shanghai Composite Index and Shenzhen Component Index, Shanghai city ahead of Shenzhen. Shanghai Stock Market has more impact on Shenzhen index, while Shenzhen index impacts the other very small.