The Construction Of Generalized Capm - Garch Model And Its Application

Yield volatility is an important conception in Finance, simply means that the size of yield deviates from its expected value. Assets yield volatility reflects the degree of uncertainty in the market, at the same time, volatility also be seen as a measure of the information stream, the high volatility generally associated with greater market impact.In recent years, using GARCH model to study the yield volatility of the stock market in China has become an important way. The impact of the financial crisis and the European debt crisis on the global economy continues, The12th Five-Year Plan of China introduced an explicit proposal to further deepen the reform of the financial system, promote financial reform and financial innovation.In this paper, on the basis of the traditional GARCH model, considering the impact of market environment on volatility, the author study the volatility characteristics based CAPM-GARCH model; And then, consider the effects of the market risk of fluctuations in asset yields, and present generalized CAPM-GARCH model. Meanwhile, on the new model, the author gives corresponding empirical analysis, and comparative analysis of empirical results.First, through the analysis of the volatility of the Merchants Bank of China’s returns, and make model, through the empirical analysis, the result is that CAPM-GARCH model is significantly better than the traditional GARCH model.Secondly, this paper makes depth study on CAPM-GARCH model, consider the effect of market risk on the asset yield, build generalized CAPM-GARCH model.Finally, the empirical analysis and result-comparing of the predictive performance indicators show that the generalized CAPM-GARCH model based on the market associated with co-volatility is superior to the traditional GARCH model.