GARCH model and fat tails of the Chinese stock market returns - New evidences

The Chinese stock market is unique in which it is moved more by individual retail investors than institutional investors. Therefore, for economic and political stability it is more important to efficiently manage the risk of the Chinese stock market. We investigate its volatility dynamics through th...

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Bibliographic Details
Published in:Journal of Risk and Control 2017-01, Vol.4 (1)
Main Authors: Day, Michael, Diamond, Mark, Card, Jeff, Hurd, Jake, Xu, Jianping
Format: Article
Language:English
Subjects:
Institutional investments
Securities markets
Stochastic models
Online Access:Get full text
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Summary:The Chinese stock market is unique in which it is moved more by individual retail investors than institutional investors. Therefore, for economic and political stability it is more important to efficiently manage the risk of the Chinese stock market. We investigate its volatility dynamics through the GARCH model with three types of heavy-tailed distributions, the Student’s t, the NIG and the NRIG distributions. Our results show that estimated parameters for all the three types of distributions are statistical significant and the NIG distribution has the best empirical performance in fitting the Chinese stock market index returns.
ISSN:2056-3701
2056-371X