The Research Of Volatility In Shanghai Composite Index Based On GARCH Family Models

The rational volatility of the stock market reflects the healthy growth of the stock market.In recent years,the research of volatility has become a hot issues in empirical finance.Late 2014 to early 2016,the Shanghai Composite Index experienced bull market and bear market.From the perspective of stock market crash which started in June of 2015,the extent of the panic which investors showed was unimaginable.So the research of volatility in Shanghai Composite Index is extremely urgent.Firstly,the thesis introduces the background of the study of volatility,the present situation of domestic and foreign research,research methods,ideas and framework.The thesis introduces the study on the theory of volatility in detail,including the GARCH model,SV model and nonparametric method.Then the thesis gives a brief introduction to the fluctuation characteristics of the Shanghai Composite Index and expounds the research method of the two-stage volatility of the Shanghai Composite Index.Meanwhile,the thesis chooses 2435 daily closing price data of the Shanghai Composite Index and the Shanghai Composite Index during stock market crash to provide an empirical analysis.It analyzes the reasons of the “anti-leverage effect” of the abnormal fluctuation characteristics from the perspective of investor behavior and the supervisory authority.The last part summarizes the conclusions and policy suggestions.The thesis indicates that the EGARCH model is better than the GARCH model to characterize the index`s volatility.EGARCH(1,3)is the best model to describe the volatility of the Shanghai Composite Index.During the bull market stage in 2015,the volatility of Shanghai Composite Index showed a strongly “anti-leverage effect”.The reason was the “herd effect” and “disposition effect” in the investor’s investment process and the lack of supervision.The thesis propounds some suggestions such as accelerate the process of the algorithmic trading,enhance the transparency of government policy and intensive the supervisionof financial derivatives.