An Analysis On The Volatility Of Medium And Small Sized Board Stock Market

There exists Main Board Market, Small and medium-sized Board Market andGrowth Enterprises Board Market in our country. Compared with Main Board Market,Small and medium-sized Board Market, which was set up latter, has some distinctivecharacteristics like smaller scale of circulation and relative concentrated equity, thusleading to the bigger volatility of Small and medium-sized Board Market. As asupplement of the study about Main Board Market volatility, this paper mainlyanalyses the volatility of Small and medium-sized Board Market. First, selecting dailyClose Price and monthly Range as the volatility indicators, Range contains informa-tion on the stock price’s volatility amplitude, so it can release more fluctuations’feature. What is more, economic data often have thick tails and structural breaks, sothis essay establishes a Bayesian quantile regression (BQR) model, using quantileregression method that based on the conditional distribution function and Bayesianestimation method through the asymmetric Laplace distribution, then tests the MCMCstability by Geweke and Raftery-Lewis methods.During the research process, this paper does some extension based on the BQRmodel. Firstly, combining the autoregressive distributed lag effect, the essay buildsBayesian autoregressive distributed lag quantile regression (BQARDL) model whichuses the Gibbs Sampling, then simulates BQARDL model and analyses therelationship among the daily Close Price of Small and medium-sized board MarketComposite Index, foreign exchange rate and interest rate. The results show that Smalland medium-sized board Market is influenced by its own past volatilities largely, theeffect of exchange rate and interest rate is small. The conclusion is stable by dividingsample into several intervals. Because the law of exchange rate and interest rate iscontrary to common sense, the following analyses more macroeconomic factors andcreates new models.Secondly, multivariate model may suffer from The Dimension Disaster with thegrowing explanatory variables, through Adaptive Lasso variable punishment, thispaper sets up Bayesian adaptive Lasso quantile regression (BALQR) model whichuses the MH Sampling, then simulates BALQR model and analyses the relationshipbetween the monthly range of Small and medium-sized board Market CompositeIndex and macroeconomic factors. The results show that economic growth andinterbank lending rate for seven days only have subtle negative relation to Small and medium-sized board Market. Furthermore, moderate inflation can weaken the stockmarket volatility which effect becomes bigger with the intensifying fluctuations. RealEffect exchange rate has the largest positive influence. These conclusions are stillsuitable after variable replacement. The above analysis reflects the virtual economyhas a tendency of separating itself from the real economy, and interest rate has littlerelation to finance market because of non-market interest rate. What is more, areasonable, balanced and market-oriented exchange rate is the most importantcondition in resolving stock market severe volatility, so the government should takemeasures like the RMB exchange rate reform steadily and orderly.Lastly, the above models do not consider the effect of random and discreteeconomic events, thus, this essay represents economic events with dummy variables,and builds another BQARDL model containing dummy variables, then simulates newmodel and analyses the relationship between the monthly range of Small andmedium-sized board Market Composite Index and Cash dividend policy. The resultsshow that Cash dividend policy suppresses the stock market volatility seriously, thestock market experienced a severe adjustment. But most of macroeconomic factors’influence has reduced. The conclusions are still reasonable though variablereplacement. This phenomenon proves that there has a separating tendency betweenreal economy and virtual economy for too much intervention in the economy by thegovernment whose mainly intension lies in the steady growth. In a word, the govern-ment’s leading investment should be moderate.