Stock Returns and Volatility: an empirical study of Chinese stock markets |
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| Authors: | Haiyan Song Xiaming Liu Peter Romilly |
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| Institution: | 1. School of Management Studies , University of Surrey , Guildford GU2 5XH, UK;2. Aston Business School , University of Aston , Birmingham B4 7ET, UK;3. School of Social Sciences , University of Abertay Dundee , Dundee DD1 1NJ, Scotland, UK. |
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| Abstract: | This paper uses GARCH models to analyse the relationship between returns and volatility on the Shanghai and Shenzhen Stock Exchanges in China. Empirical estimates using the sample data from 21 May 1992 to 2 February 1996 suggest that the variances of the returns in the two markets are best modeled by the GARCH-M (1,1) specification. Volatility transmission between the two markets (the volatility spill-over effect) is also found to exist. The results of one month ahead ex ante forecasts show that the conditional variances of the returns of the two stock markets exhibit a similar pattern. |
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