Estimation On Realized Volatility In China Stock Market

As we know, stock market is a very good indicator of macro economy. And the fluctuationin stock market would also lead to significant influence on economy status and social stability.As a result, the fluctuation in stock market has always been a key study area for researchersaround the word and also has been one of the most important indexes for both investors andauthorities. Volatility is used to demonstrate the change in the return of asset investment,which is also a measure of the risk for an asset. To be more specific about the financial market,volatility refers to the uncertainty of the price of financial products and security portfolio andcould also be used to measure the risk of stock market. And successfully forecasting the returnrate fluctuation would bring benefit to not only risk management, pricing and hedging, butalso assist to modify the portfolio and even further improve the governance mechanism of thestock market.In this paper, the stock market return rate will be forecasted by applying HAR-RV-CJmodels. HAR-RV-CJ model would distinguish the return rate between continuous path anddiscrete path. So, this paper applies the wavelet transformation method as a mathematicalmicroscope to test the jump behavior of the return on stock market asset, and estimate theposition, range, frequency and variance of jumps. The TSRV method is then used to model thesamples without jumps and obtain continuity fluctuation after removing noises. Subsequently,the return rate will be distinguished between continuous sample path and discrete sample pathand a model would be built with the return rate data obtained.Finally, based on the theoretical and empirical analysis, considering the characteristics ofthe Chinese stock market, the administration needs to further strengthen the informationdisclosure mechanism, improve the quality of the investors, minimize policy intervention,accelerate financial innovation and reinforce risk aversion mechanism.