Empirical Study On The Impact Of SSE 50 ETF Volatility Index By ARCH Model

Emotional volatility in the market is an important factor that affects market trends,and it is difficult to find indicators that can measure sentiment.It was not until November 28,2016 that the Shanghai stock exchange officially launched the SSE 50 ETF Volatility Index(short for iVX)based on the SSE 50 ETF option.Due to the late establishment of China’s volatility index,academic research on iVX is rare.This paper starts with the SSE 50 ETF Volatility Index and the SSE 50 ETF.First,the performance of SSE 50 ETF Volatility Index is calculated.Secondly,the impact of the SSE 50 ETF Volatility Index is analyzed empirically.Finally,the fluctuation spillover effect between SSE 50 ETF Volatility Index and SSE 50 ETF is tested.Thus,the effectiveness of the Shanghai 50 etf volatility index is studied.First,this paper selects February 9,2015 to June 9,2017 as the sample space,and the volatility and risk characteristics of the market are reflected in the logarithmic yield.Secondly,the correlation between iVX and SSE 50 ETF volatility was analyzed by descriptive statistics and granger causality test after the test of stability.Then the ARMA model is used to fit the yield sequence and determine whether the residual sequence has an ARCH effect,if there is,GARCH can be used to model.Then the GARCH(1,1)model of the virtual variable was constructed to determine the impact of iVX on the volatility of the spot market.And the model of TARCH is used to explore the influence of the introduction of iVX on the non-symmetry of spot market fluctuation as well.Finally,the iVX index was modeled using the GARCH model,which is to explore the spillover effect between the SSE 50 ETF and the iVX index.The main conclusions of this paper are as follows:(1)The SSE 50 ETF Volatility Index runs in line with expectations.(2)The iVX can effectively sta bilize the market and predict the function of market fluctuation.(3)There is a two-way fluctuation spillover effect between iVX and SSE 50 ETF.Overall,t he SSE 50 ETF volatility index has obvious effectiveness,but its influence is small.The contributions of this paper are mainly embodied in the following three levels: first,this research can effectively enrich the academic circles’ lack of research on China’s volatility index theory.China’s volatility index iVX has been launched in November 2016,and the academic research results are less.In this paper,the research on the linkage between iVX index and underlying market is a useful supplement to China’s volatility index research,enriching the domestic research results of China’s volatility index.Second,this paper empirically studies the role and influence of iVX index.The existing literature on China’s volatility index is limited to index compilation and related relationship with the underlying market,and lacks the research on the role and impact of China’s iVX index.This paper studies the role and influence of iVX index by establishing ARMA model and GARCH model and TARCH model with dummy variables.Third,the volatility spillover effect between iVX index and SSE 50 ETF is studied in this paper.At the same time,in the process of fitting the iVX exponent,Fourier transform is used to find the periodic characteristics of the SSE 50 ETF Volatility Index.